Month: August 2013

Fed and ECB accused of ‘muddying the waters’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As markets digest monetary policy statements from three of the world’s major central banks within 24 hours, two of the institutions have been hit with accusations of causing confusion and lacking transparency by economists.

The US Federal Reserve kicked off the medley of announcements on Wednesday, and was closely followed by the Bank of England (BoE) and European Central Bank (ECB) on Thursday.

All three banks agreed that consumer and business confidence was on the up, giving a boost to long term growth prospects, but both the ECB and the Fed “muddied the waters” and lacked transparency, according to some economists.

Jennifer McKeown, senior European economist at Capital Economics, said there was “significant confusion and some disappointment” about ECB President Mario Draghi’s lack of clarity on the longer-term policy outlook.

 “Despite trying to improve the ECB’s transparency last week, president Draghi seems mainly to have muddied the waters,” she said. “Admittedly, he added some detail to last month’s pledge that interest rates would ‘remain at present or lower levels for an extended period’ by stating that markets’ expectations of a hike in late 2014 were ‘unwarranted’. But despite this, markets’ rate expectations have since edged up.”

McKeown said the ECB’s “hawkish reputation” – as a result of the implementation of two unexpected rate hikes – was not helped by Thursday’s meeting. Draghi’s particular focus on the inflation outlook had done little to “assure markets that the Bank will not make the same mistake again,” she said.

“In all, the bank has a lot more work to do if it wants to be considered a truly transparent institution,” she added.

 McKeown’s comments echoed remarks made last month by Richmond Fed’s Robert Hetzel and International Monetary Fund chief Christine Lagarde. Hetzel described the ECB as lacking a “coherent strategy” and urged it to stop using monetary policy as a “lever for achieving structural changes and to end its contractionary policy,” while Lagarde warned central banks that any pulling back must be flexible, visible and predictable.

Alan Higgins, chief investment officer at Coutts, was also left confused by the central bank announcements, but rather than bashing the ECB, he accused the Fed of lacking a clear plan.

Fed Chairman Ben Bernanke’s said on Wednesday that rates would not increase anytime soon, and its monthly bond buying program – known as quantitative easing or QE – would be trimmed back only if the data points, particularly on unemployment, continued to improve.

 “European policymakers are trying hard to bring down long-term interest rates and assist economic recovery by adding clarity and direction, but the Fed appears to have done the opposite,” he said. “Its decisions appear more dependent on volatile data points (that are often heavily revised) than a well-thought-out exit plan.”

Higgins added that while the assessments of growth were becoming more alike in Europe and the U.S., plans for how to deal with ultra-low interest rates in a recovery were starting to look very different – and in the Fed’s case, unpredictable.

The U.S. central bank also raised concern about rising government bond yields – which have move higher following Bernanke’s comments to Congress about QE in June – and the impact this will have on the housing market.

But this reference to the run-up in mortgage rates as a result of rising yields added yet another “worry to the list,” according to Higgins. “The Fed has in effect made it more difficult to work out its next move.”

More from CNBC

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Time to bet on Chinese exporters: Goldman Sachs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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While China`s exporters are reeling from weak external demand, Goldman Sachs recommends gaining exposure to the mainland sector now since it is set to benefit from a turnaround in the global economy, in particular a revival in the US economy.

“China`s exports have been highly correlated (correlation at 84 percent) with the global economy since 2000, despite less GDP [gross domestic product] reliance on net exports than before,” strategists at Goldman Sachs wrote in a new report on the beneficiaries of the global recovery.

“The global recovery could be a multi-year investment theme and export-driven listed companies could benefit and outperform the market against the global economy`s recovering backdrop,” they said in a report.

As the US and euro zone economies stage a recovery, Goldman Sachs expects global growth to accelerate to 3.1 percent in the second half of 2013, from 2.7 percent in the first half, and to 3.8 percent in 2014, higher than the 10-year average of 2.6 percent.

The US and Europe are China`s second and third biggest export destinations, after Hong Kong, accounting for 16 and 15 percent of total shipments, respectively. While Hong Kong is the mainland`s top export destination, at 19 percent, a significant portion of shipments into the city are re-exported to the West.

Despite China`s dismal trade data in the recent months, Goldman believes the country`s export growth will recover later this year. In June, exports declined 3.1 percent against forecasts for a rise of 4 percent – the first fall since January 2012.

It recently lowered its forecast for China`s full-year economic growth to 7.4 percent for 2013 from 7.8 percent.

The bank said some of the mainland`s top export products – such as kitchen appliances, furniture, TV/telecommunications equipment, computers, toys, bicycles and textiles – are directly linked with the housing market in the US, and will therefore see higher demand as that sector recovers.

Companies to bet on

Goldman identified several mainland listed companies that could benefit from this theme. They include Shenzhen-listed hand tool maker Great Star, computer accessory producer Anjie Technology, wood furniture manufacturer Yihua Timber and agriculture chemicals firm Lianhe Chemical.

The bank noted that each of these companies has a market capitalization of above USD 4 billion yuan (USD 652 million), and derives 50 percent of their revenue from sales overseas.

It also recommended mainland exporters listed in Hong Kong including shoe manufacturers Stella International and Yue Yuen Industrial, global PC maker Lenovo and telecom equipment provider ZTE .

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is the worst over for risky assets?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Risk assets such as emerging market equities have been thrown under the bus in the recent months on concerns about the Federal Reserve scaling back its monetary stimulus, but with investors coming to terms with tapering, are the worst days over for the battered asset class?

The MSCI emerging markets index has plunged 8.2 percent over the past three months, a stark contrast to the S&P 500 and FTSEurofirst 300 gains of 7.9 and 1.6 percent, respectively, over the same period.

This is among the worst-ever periods of performance for emerging market equities relative to their developed market counterparts, according to Morgan Stanley.

But the storm has likely passed, says research firm Capital Economics, which argues that impact of tapering and worries over a growth slowdown in the developing economies, have now been factored into equity prices.

“A tapering of the Fed`s asset purchases is surely now discounted. The central bank should continue to tread extremely carefully, with rates probably remaining near-zero until early 2015,” Capital Economics, wrote in a new report.

“Second, although the prospects for growth in emerging economies may have diminished we do not think this will have much additional negative impact on the prices of emerging market equities,” the firm said, adding that some countries, such as Mexico, should actually benefit from a revival in the US economy.

In addition, valuations do not appear to be stretched anymore, the firm said, noting that the price to earnings ratio of the MSCI Emerging Markets Index at around 12 remains comfortably below its ten-year average of 15.

Given the decline in valuations, the firm expects emerging Europe and parts of Southeast Asia to attract investor interest. It forecasts the MSCI Emerging Markets index, which currently stands at 956 to end the year at 940, before climbing to 975 in 2014, and to 1,025 in 2015.

“Another reason why we are relatively sanguine about the outlook for emerging market equities is that persistent underperformance vis-à-vis developed market equities has typically only occurred when there has been a major global economic or financial crisis. We do not assume there will be another such crisis in the next few years,” it added.

While Capital Economics believes the medium to longer-term outlook may be more encouraging for the asset class, Morgan Stanley is not as convinced. The bank, which rates emerging market equities as the “least preferred” within its global equities coverage, said a host of factors need to be watched to determine the outcome for the asset class.

Some of these include the funding environment for emerging markets as US monetary policy tightens, the impact of Japan`s resurgence on other export-driven economies, and China`s slowdown. The dependence of emerging markets on China, particularly those in Asia, has increased sharply in the recent years as the country has emerged as a key source of end demand for exports.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

First lady named best dressed, and it isn’t Michelle Obama

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Even before her husband became the next Chinese leader, the wife of President Xi Jinping, Peng Liyuan, was already turning heads with her fashion choices as a famous folk singer in the world`s second largest economy.

Now, China`s first lady has landed on the coveted annual Vanity Fair international best-dressed list. Her US counterpart Michelle Obama, however, has not made the list for the second time since 2007.

Peng, 51, is the only Chinese person to the make the prestigious list this year, together with the likes of celebrities Beyonce and Justin Timberlake, and Duchess of Cambridge Kate Middleton.

Peng drew worldwide attention in March, when she received accolades for an outfit worn during a trip to Russia with her husband. Vanity Fair said her ensemble of a black double breasted and belted coat, and a handbag by Chinese fashion label Exception was the most notable of 2013 (pictured).

The Chinese first lady has since appeared frequently in fashion news, and been described in the media as “photogenic,” “glamorous,” and even nicknamed as the “Carla Bruni of the East” after singer and former model wife of former French President Nicolas Sarkozy.

(Read more: China`s glamorous new First Lady an instant Internet hit )

China had hoped Peng could deploy her charms on America during an official trip with Xi to California in June, but her appearance to the media was limited because of the absence of Michelle Obama, who decided to remain in Washington during that time. Obama`s move was widely interpreted in the media as a snub to Peng.

Twitter talk

Peng`s entry into the Vanity Fair list is generating buzz on social media, with many Twitter users lauding her elegant and fashionable style.

Grace Lam tweeted China`s first lady #Peng Liyuan made it on @vanityfair best dressed woman luv her chic style!

Amandadnama tweeted Beginning of Beijing Fashion? China`s first lady Peng Liyuan makes @VanityFair`s best dressed list #ChinaBiz #china

Others took to comparing Peng to US first lady Michelle Obama.

L.A. Times film editor Julie Makinen tweeted So China`s first lady is on Vanity Fair`s best dressed list, but Michelle Obama is not?

Justin Hill tweeted Forget the US-China cyber-war: this is serious – First Lady Fashion

While Financial Times fashion editor Vanessa Friedman questioned the geopolitics behind the fashion list and tweeted #MObama is NOT on the #VFbestdressed list; only first lady to make the cut: China`s Peng Liyuan. Is there a geopolitical pt being made here?

-By CNBC.com`s Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu .

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why markets are getting comfortable with higher rates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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For a good part of this earnings season, we’ve heard comments from companies that lackluster earnings in the first half should improve in the second half, along with the economy.

Today, the bulls got some ammunition as July manufacturing report for the US came in stronger than expected, with strong showings for new orders, as well as employment.

It wasn’t just in the US: manufacturing reports in Europe and China were also a bit better than expected.

The major indices reacting by moving to historic highs…that’s a bit of a surprise considering interest rates (yields on 10-year Treasury bonds) have moved up as well. In the past, higher rates have rattled stocks.

But maybe that’s changing.

Have you noticed the pattern this week:
• ADP stronger than expected: rates higher, markets up
• ISM stronger than expected: rates higher, markets up
• Jobs report: ?

That’s the big question: How will the markets react if the jobs report comes in a little stronger than expected, say, over 200,000 jobs created.
If that happens, and rates go up while the stock market goes up or even stays even, that will be a sure sign the trading community is getting comfortable with higher rates.

Exxon Mobil: here’s the problem in a nutshell…Exxon’s big miss this morning took everyone by surprise. A lot of people shrugged it off, arguing that misses because of refinery shutdowns (they are typical in the summer) are nothing new.

But it’s worse than that. The entire report was “a clunker” as one prominent oil analyst called it, missing on all sorts of metrics, including gas production.
But it’s worse than even that. Here’s the problem: big oil can’t grow. They can’t get enough oil to replace what is being used. Exxon, for example, produces about four million barrels a day (nearly five percent of the world’s output), but that’s declining about six percent a year, or a loss of 240,000 barrels.

Think about that. Just to stand still, they have to grow at least six percent. You know how hard that is? A decent well will throw off maybe 500 barrels a day (1,000 is a gusher), and then typically declines 30 percent in the following year. You have to find a lot of wells to replace 240,000 barrels a day!

Then there’s geography. It’s true the US has found new sources, particularly for natural gas, but don’t kid yourself. Much of the world’s oil is in politically difficult areas. The top five producers remain Saudi Arabia, Iran, Iraq, Nigeria, and Venezuela, as well as Russia.

Throw in higher taxes from everyone, you have a real problem: 1) no growth, 2) no growth in returns.

What to do? The obvious answer is to increase buybacks, but buybacks for Exxon have been shrinking. The other choice is to increase dividends. Exxon now pays a 2.7 percent dividend, well above the 1.7 percent the S&P 500 pays, after raising it 11 percent in April. But there have been calls for an even higher dividend. I wouldn’t be surprised if they accommodated.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Will DBS, Danamon deal collapse curb Indonesia M&A?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A decision by Southeast Asia`s biggest bank to quit a year-long pursuit of Indonesia`s Bank Danamon highlights how tough the country`s regulatory framework is and could deter other foreign banks from showing interest in the banking sector, Fitch Ratings said on Thursday.

Singapore lender DBS on Wednesday walked away from a USD 7.2 billion deal to buy Bank Danamon in what would have been Southeast Asia`s largest banking takeover.

“We believe the collapse of the deal is likely to discourage some long-term foreign buyers looking to establish and build a local franchise,” Fitch said in a report.

DBS said regulatory hurdles were the main reason from walking away from the deal, with Jakarta capping foreign ownership of banks at 40 percent – much lower than DBS`s plan to buy a 67 percent stake.

Fitch said that owning a minority stake in Danamon would have made it difficult for DBS to achieve the same degree of integration in Indonesia that it has with its subsidiaries elsewhere in the region.

“Without majority control, no bank or any company would like that,” Kevin Kwek, senior analyst at the brokerage Sanford C. Bernstein, told CNBC Asia`s “Cash Flow.”

“You don`t have control and some of the other banks that already have stakes would equally be concerned as to whether any changes going forward would be retro-active and if they were, you would certainly take out a lot of interest in the local banking sector,” he said.

Investment hit

The collapse of the bank deal is bad timing for Indonesia, where the foreign investment outlook has been hit by a spike in currency volatility, protectionist measures such as the tightening of import quotas, duties on exports of raw minerals and restrictions on foreign ownership of local mining firms.

Indonesia, once the darling of foreign investors, has also suffered from a fall in the appeal of emerging markets generally. Foreign investors have pulled roughly USD 2 billion from the stock market throughout June, according to government data.

There is concern that tighter control of the resource sector could spread to other areas.

“There`s the sense that as a foreign player, you could end up in a situation where the playing field is not as level as you like,” said Economist Intelligence Unit CEO Robin Bew.

“It`s not sensible because places like Indonesia are going to need to be attractive to foreign capital, especially at this time when we are seeing growth slowing across the world,” Bew added.
Still, Fitch said Indonesia`s banking sector remained attractive.

“The country has low credit penetration relative to other fast-growing markets (India and China), an expanding middle class, a resilient economy, and high net interest margins,” it said.

“The cap on Indonesian bank ownership of up to 40 percent is still high by regional comparison. But foreign capital is necessary for the market to fulfil its potential; and can also bring better risk, transparency and governance discipline to the banking sector,” Fitch added.

Blessing in disguise?

DBS, which has been keen to get a bigger slice of the fast-growing Indonesian market , on Thursday posted a 10 percent rise in second-quarter profit. CEO Piyush Gupta said that the bank would focus on expanding its business in Indonesia without chasing acquisitions.

The strategy could be more successful than a Danamon acquisition would have been, analysts said.

“This is actually positive in the sense that DBS can now re-focus its energy and capital to building businesses that would have likely been put on hold pending a decision on the Danamon deal,” said Kwek at Sanford C. Bernstein.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

US economy should be growing at 3-4%: Ex-Fed governor

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The US economy has the ability to grow at a rate of 3-4 percent if policy makers removed the constraints obstructing its potential, former Federal governor Robert Heller told CNBC on Thursday.

Heller’s comments follow better-than-expected gross domestic product (GDP) figures on Wednesday, which showed the world`s largest economy expanded 1.7 percent growth in the second quarter from the year before, exceeding expectations of a 1 percent rise and an increase on the first quarter`s downwardly revised 1.1 percent.

“We may be out of the woods, but we are [still] walking in a mud field,” said Heller, who served on the Fed`s board from 1986 to 1989 under President Reagan.

“We are stuck in a range of 1-2 percent growth, which is not where we should be. If you would take some of the constraints off the US economy, it could be growing a lot faster at 3-4 percent,” he added.

Heller said one of the key constraints was restrictions on drilling activity on government-owned land which has prevented oil and gas companies from expanding at the pace they should be.

He also said the US economy had a number of untapped resources, including the large amount of unemployed people , together with hoards of corporate cash holdings sitting on the sidelines.

“US corporations have the largest cash holdings they have ever had, so the potential for growth is there but you`ve got to let it happen and not restrain it,” he added.

December taper?

On the ongoing debate over when the US central bank might scale back its USD 85 billion a month bond buying plan, which has kept markets transfixed since Fed chair Ben Bernanke first suggested it was on the cards in May, Heller said he expected tapering to commence in December, later than the broad consensus forecast of September.

“Probably the current Fed will want to do so [start tapering before the end of the year] so the new Fed chief who will take office at the end of January next year will not have to change policy at the first meeting,” he added.

Speculation has been rife over who might replace Bernanke when his term expires, with vice chair Janet Yellen and former Treasury Secretary under Clinton`s administration, Larry Summers, emerging as possible candidates.

Heller voiced concerns over whether Summers would be the best person for the role.

“Summers clearly is a very bright man but he also speaks his mind and he`s not exactly known to be the great consensus builder that Bernanke has been in his time,” he said.

“He might have a harder time holding the Federal Open Market Committee (FOMC) together… if you were to get more dissent that would make policy making more difficult,” he added.

Heller told CNBC in June that Yellen was the most credible candidate for the job.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Are fears over China government debt overblown?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Beijing’s move to conduct a nation-wide audit of China`s local government loans this week has fueled fears over the severity of the state`s colossal debt pile, but Bank of America Merrill Lynch (BoFA) has argued that the concerns are overblown.

According to economists at the bank, China`s local government debt, which is estimated to be around 15-16 trillion renminbi (RMB) (USD 2.5-2.6 trillion) as of the end of 2012, still stands at a very low debt-to-GDP ratio of 30 percent.

When combined with the central government debt, China`s total debt still measures 50 percent of GDP, which BoFA describes as a relatively healthy position compared to other highly leveraged economies like the US and Japan, which have debt to GDP ratios of around 100 percent and 175 percent, respectively.

In addition, its central bank`s cash savings, equivalent to 6 percent of GDP, places the central bank in strong position to weather any shocks, said the bank.

And even if a crisis situation were to arise, it would be manageable as almost all government debt is denominated in local currency and owned by domestic entities, meaning that “the PBoC can prevent a government debt crisis with its unlimited capability in liquidity supply,” the bank noted.

“We are not saying that markets should be complacent about local government debt, but we see little new news,” China economists Ting Lu and Xiaojia Zhi at BoFA wrote in a new report.

“We don`t think China is on the brink of a government debt crisis, especially if the new leaders can take sensible measures in coming years,” they added.

Local government debt is regarded as a key risk to the financial stability in China, with ratings agency Fitch cutting the country`s long-term local currency credit rating to A-plus from AA-minus earlier this year.

The audit order, which would be the country`s second-ever comprehensive review of the country`s spending, has rattled investors who are concerned that the leveraging situation in China may be a lot worse than previously thought.

But BofA says markets shouldn`t be too concerned, or read the measure as an “urgent” move.

“We believe the audit has been planned for several months as part of the new government`s mandate,” the note said. “We may take this audit as a first step in the new leaders` `kitchen sinking` move.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Will China PMI mark the end of negative data surprises?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The positive surprise in China`s official reading on the manufacturing sector Thursday is a result of improving business sentiment on the back of Beijing`s recent stimulus announcement, analysts told CNBC.

The government`s Purchasing Managers` Index (PMI), which rose to 50.3 in July from 50.1 in June and beating market expectations of 49.9 according to a Reuters poll, also marks the first sign of stabilization in the world`s second largest economy, they added.

The key 50 threshold demarcates expansion from contraction.

“Since mid-July Premier Li has made it very clear that his government will try to achieve the 7.5 percent growth target with some policy easing measures including more investment in infrastructure fixed asset investment,” Ting Lu, head of Greater China economics at Bank of America Merrill Lynch wrote in a note.

“So the official PMI survey which was conducted late July could be impacted by the more positive sentiment,” he said.

Last week, the government unveiled initiatives to support growth including cutting taxes for some small and micro-sized enterprises and measures to stabilize exports and speed up railway investment.

According to Dariusz Kowalczyk, senior economist and strategist, Asia ex-Japan at Credit Agricole, this could be the end of negative surprises in the country`s economic data.

“This may mark the beginning of a turnaround in sentiment on China,” he said.

The changing sentiment could explain how investors shrugged off a separate private reading of the manufacturing activity, which was also out on Thursday, which showed a different picture of China`s economy.

The HSBC final China PMI fell to an 11-month low of 47.7 in July from 48.2 in June, in line with the flash estimate released last week.

But investors chose to focus on the official figure, pushing the Shanghai Composite up 1.1 percent, and the Hong Kong`s Hang Seng up 0.6 percent.

According to Lu of Bank of America Merrill Lynch, as the economy shifts away from its dependence on exports, more attention should be paid to the official PMI.

“In our view, at this moment we should surely focus on the official PMI simply instead of the HSBC PMI because exports now only contribute 10 percent of China`s GDP,” Lu said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Betting on a Tokyo Olympic win? Stocks you may like to own

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Tokyo is one of three cities in the running to host the 2020 Olympic Games and with a vote on the successful country due in September, there are a number of Japanese stocks that could do well if Tokyo wins the bid, says one equity strategist.

Well-known brands such as Canon, advertising firm Dentsu and security company Secom are among the companies that Ben Collett, head of Asian equities at Sunrise Brokers in Hong Kong, recommends investors snap up if they think Tokyo has a good chance of hosting the Games.

Japan`s capital city is going head-to-head with Madrid and Istanbul in the bid to host one of the world`s most famous sporting events, and according to media reports, Tokyo has a narrow edge over its rivals.

“Construction firms have been doing well in anticipation of Tokyo winning the bid and among the other names we think will do well include the big brands that will get exposure from sponsorship deals such as Softbank, Hitachi and Fujitsu ,” said Collett.

He said his firm did not take positions in these companies but had advised clients to buy them.

“We had recommended a short position in Fast Retailing, which we`ve taken off,” he said, referring to the Japanese retailer which runs the Uniqlo fashion chain.

Japan`s blue-chip Nikkei has been the best performing major equity market this year, with gains of about 30 percent.

A mix of aggressive monetary stimulus from the Bank of Japan, brighter economic prospects and a weak yen, have all propelled Japanese shares higher and a successful win for Tokyo in the 2020 Olympic bid could give the market an additional boost.

“There is an expectation that Tokyo will win the Olympic bid so there are a number of stocks you could buy to position for that,” said Collett. “If you have to narrow down the list then I would say Canon, Fast Retailing, Dentsu and Secom.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow