Equities

Countries and commercial operators are racing into space to accrue economic gain from space exploration. In coming years, the space industry will continue to grow, as humans venture into space for tourism, mining, farming, and even habitation. The industry is still in its infancy but has tremendous potential. We believe it is one of the next big investment ideas. We will monitor the theme and take on investment exposure once it matures.

China removed checks and balances in its political system to deal with a very dangerous economic transition. The transition is going badly, yet investors cannot rely on checks and balances to correct or prevent policy mistakes. The Taiwanese election is a looming bellwether.

In part 2 of this series, we discuss mainstream EM equity valuations and present the results of our cross-country analysis. The goal is to identify overweights and underweights within an EM equity portfolio.

Deflation prevails in China’s economy. Marginal interest rate cuts will be insufficient to boost growth as the economy is experiencing debt deflation and might be entering a liquidity trap. There will likely be more economic disappointments in the coming months. Chinese stocks will continue to sell off. Government bond yields will fall to new lows, and the RMB will depreciate further against the US dollar.