World’s first ethically sourced smartphone unveiled

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

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Techies could soon text with a clear conscience as the world’s first fair trade smartphone is unveiled in London on Wednesday.

Dutch company Fairphone is introducing its ethically sourced phone while industry leaders, including Samsung and Apple, continue to face criticism over factory conditions and mineral sourcing.

Over 15,000 Fairphone handsets, retailing at 325 euros, have been pre-ordered from the firm’s first 25,000 unit production run. The prototype on show at the company’s Soho pop-up shop will be the first customer glimpse before deliveries begin in December.

Though Fairphone CEO and Founder Bas van Abel stressed the phone isn’t 100 percent ethical, the project took some crucial first steps.

(Read more: Ubuntu smartphone axed after crowdfunding drive fails)

Fairphone partnered with NGOs, like the Conflict Free Tin Initiative and Solutions for Hope, which provide a traceable supply chain for minerals essential to smartphone production—tin, tungsten and tantalum—that traditionally come from army controlled mines in the Democratic Republic of the Congo.

A living wage review is also underway to ensure workers in China’s A’Hong factory receive fair pay while assembling Fairphone’s first 25,000 phones this November.

“What’s important here is they didn’t compromise on experience,” said Jeronimo Francisco, IDC Research Director of European Mobile Devices.
 
Fairphone specs include a custom Android OS, quad core processor, 4.3 inch reinforced screen, and dual SIM capacity—allowing both work and personal phones to rest on one device.

(Read more: Move over Apple? Russian firm crosses iPhone with Kindle)

The phone won’t be sealed either and will come with instructions for self-repairs.

Some companies have tried to go greener with their handsets, but Fairphone is the first initiative that tries to look at both the fair trade and green prospects throughout the entire supply chain, Francisco said.

Giants like Sony highlighted the reduced carbon footprint in their C901 GreenHeart and Naite models in 2009, and Apple recently touted recycled material in its iPhone 5C.

It’s unclear how disruptive the Fairphone will be to a handset market that Francisco said is expected to ship 1 billion units by the end of the business year.

(Read more: For Apple, mum’s the word on iPhone 5C pre-orders)

But Michael Morgan, a senior mobile devices analyst for ABI Research said operators and retailers need to be the driving force of the Fairphone initiative. “If the retailers of phones don’t demand that phones become green or ethical…then there is little economic incentive to make them green or ethical.”

Van Abel confirmed that a number of telecommunication giants have already approached Fairphone, including Telefonica and T-Mobile.
“We don’t have any partnerships, but they’re interested in what we’re doing,” said Van Abel.

KPN plans to buy 1000 of the first handsets and Vodafone has held informal meetings with Fairphone, helping the team develop a longer-lasting phone and experimenting with quality design.

(Read more: Samsung may already be working on next version of smartwatch)

The handset is unlocked and usable with any mobile provider but will only be delivered within Europe this year. Van Abel hinted at North American and Australian shipments for the second batch if all goes well.

Fairphone crowd-sourced its startup funds from customer pre-orders, and plans to reinvest any first run profits into its supply chain. Next, it hopes to ethically source both gold and the cobalt needed for the handset’s batteries.

“The movement is about inspiring the industry. It’s more about different ways of doing business than a solution for all the problems. We don’t have solutions yet,” said Van Abel.

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Markets expect taper lite, but what if it’s taper zero?

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

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The Federal Reserve’s big day is finally here. Expectations that the central bank will announce a USD 10-20 billion reduction in its monthly asset purchases are running high, but what if Chairman Ben Bernanke gets cold feet?

Such a decision would spark a bout of volatility in financial markets, highly undesirable given the fragile state of the recovery in the world`s largest economy, market watchers say.

“Knowing that investors have waited with bated breath for this month’s (Federal Open Market Committee) meeting, team Bernanke knows that if they fail to manage the market`s expectations properly, they risk triggering a sharp rise in volatility… that could end up threatening the overall recovery,” said Kathy Lien, managing director at BK Asset Management.

“The mere talk of tapering has already sent 10-year yields up a full percentage point and this move was a shock to policymakers around the world,” she added. Ten-year Treasury yields have risen sharply since May, from around 1.6 percent to 2.84 percent currently.

A CNBC survey of 47 economists, money managers and Wall Street strategists found that, on average they expect about USD 15 billion in tapering, with far more focus on Treasury purchases than mortgage-backed securities.

The central bank has been buying both assets as part of its most recent quantitative easing program launched in September 2012 aimed at driving down long-term interest rates, lowering unemployment and boosting economic growth.

According to Bill Smith, CEO of SAM Advisors, U.S. bonds yields could head back to 2 percent “really fast” if the Fed does not start to wind down its easy-money policies at Wednesday`s meeting.

It would “catch people by surprise and the bond market will absolutely rip,” Smith said. “The equity markets would rally on this; it just means more easy money.”

On the currency front, a decision not to taper would trigger US dollar weakness, said Vassili Serebriakov, currency strategist at BNP Paribas. “We would be more comfortable buying the likes of the Australian dollar and the Canadian dollar on this kind of news.”

Signs of softness in the US economy in the recent weeks, including disappointing nonfarm payrolls data for August and a fall in consumer confidence have raised speculation among some investors that the Fed may postpone reducing its monetary stimulus.

Peter Schiff, CEO and chief global strategist of Euro Pacific Capital, still thinks there`s a chance the central bank won`t taper at Wednesday’s meeting.

“Remember the Fed initially talked about an exit strategy, but of course it was lying, it never had an exit strategy. Now it acknowledges it`s not even thinking about exiting, its juts talking about reducing the expansion of its balance sheet,” he added.

Read more: Relax. The markets aren’t running on QE anyway

Market sees $15 billion Fed taper soon: CNBC Fed Survey

Fed taper likely to be announced this week: El-Erian

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China home prices rise for eighth straight month

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

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New home prices rose in 69 of 70 major Chinese cities in August from the previous year, official data showed on Wednesday, the same showing as in July, backing the case for more cooling measures from the government.

New home prices in Beijing rose 14.9 percent on year in August, compared with 14.1 percent in July, while prices in Shanghai climbed an annual 15.4 percent for August versus 13.7 percent in July, according to the National Bureau of Statistics.

(Read more: China property immune to tapering: China`s richest man )

On average, new home prices across the country rose 8.3 percent on year in August, according to calculations by Reuters based on the data, higher than July`s 7.5 percent annual increase and marking an eighth straight month of gains.

Chinese authorities have embarked on several rounds of cooling measures in recent years to bring down stubbornly high real estate prices.

According to Alan Jin, property analyst at Mizuho Securities Asia, a lack of supply continues to drive prices higher.

(Read more: China`s property sector is booming even as economy slows)

“In terms of home price growth, for the moment they are having a shortage of supply. There are not enough high-end products. Once launched, they are usually snapped up overnight or in the short-term,” he told CNBC.

“From 1998 to last year, the total number of private housing units completed was only around 6 million, accounting for 26 percent of urban households, he said. “[This] means ownership of private housing is still pretty low. That`s why it`s harder to contain housing prices,” he added.

Shares of real estate developers were mixed on Wednesday on the news, with Shanghai Shimao higher by 1 percent and China Merchants Property lower by 2.7 percent.

(Read more: Why China`s property market is getting scary )

Despite the persistent price gains, analysts say the latest figures aren`t expected to trigger further property cooling measures from the government.

“The government seems to have tolerated rising property prices and has not rolled out new tightening measures, which, given the importance of the sector to the economy as a whole, may partly reflect the challenge it faces in achieving a 7.5 percent growth target for 2014,” Zhiwei Zhang of Nomura wrote in a note.

Zhang expects the government to slash 2014 growth target to 7 percent in December, and start tightening monetary and property sector policies after the Communist Party meeting in November.

He expects the Chinese economy to grow 6.9 percent in 2014.

Copyright 2011 cnbc.com

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Finally, taper time is here

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

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Talk of the Federal Reserve`s so-called `taper` has played on investors` nerves for weeks but markets now appear to be in sync with expectations the central bank will announce plans to wind down its USD 85 billion asset purchase program.

The Fed is expected to wrap the plan in highly dovish language in its 2 p.m. statement Wednesday, and Fed Chairman Ben Bernanke is expected to reinforce that the Fed will hold down short-term rates for a very long time when he briefs the media at 2:30 p.m.

(Read more: Fall of Summers points to a government shutdown )

Bernanke, presiding over one of his final meetings, will also be setting in motion an exit strategy for his successor to follow. The street expects Fed Vice Chair Janet Yellen to be named Bernanke`s successor after former Treasury Secretary Larry Summers withdrew his bid over the weekend.

The street expects to see USD 10 to USD 15 billion pared from the Fed`s monthly bond purchases, and many expect a greater reduction of Treasury purchases than mortgage purchases.

“We`re going to over-focus on taper and what`s the point? It seems to be a question of USD 10, USD 15, or USD 20 billion, so the skew of expectations is not that large,” said John Briggs, head of cross-asset strategy at RBS. “More important to me is how firmly the Fed pushes back on the market pricing of rate hikes and tries to re-anchor the front end of the curve.”

The Fed will also unveil its 2016 forecasts Wednesday; there`s been a lot of anticipation about what that will say about the Federal funds target rate in 2016. The rate influences a range of consumer and business loans, and the Fed has tried to assure markets it will not move short-term interest rates any time soon.

(Read more: Market sees $15 billion Fed taper soon: CNBC survey )

Briggs expects the Fed to hold rate projections low in 2016, around the markets` expectations of close to 2 percent.

“It would reaffirm to the market that despite tapering, rates are going to stay low for a long time. Even if in 2016, when you`re likely to see unemployment near normal, rate expectations are going to stay low,” Briggs said. If the forecasts show rates at 3 percent, he said bond market would sell off, sending rates higher and stinging stocks.

Barclays chief US economist Dean Maki, however, said he expects the Fed to show a 3 percent rate by the end of 2016. “We do expect it to be perceived somewhat hawkishly, and even if it`s priced significantly above 2 percent, the market seems to be pricing about 2 percent,” he said. Maki said by then unemployment would be at its natural rate and inflation at the Fed target rate.

Fed watchers also see a chance that the Fed moves its unemployment target – the level where could start to raise rates – to 6 percent from 6.5 percent.

(Read more: Why US rebound may send bonds, dollar crashing)

“If they want to be really aggressive enhancing the forward guidance forcibly is the way to do it, but I`ll be surprised if they`re willing to go that aggressively right now,” said Jens Nordvig, global head of G-10 currency strategy at Nomura. “It seems to sort of potentially create problems down the line…I don`t think they`ll take that step right now.”

Strategists say a bigger surprise for markets would be if the Fed does not taper. The Treasury market is not expected to have a major move if the Fed is dovish in its comments. As for the mortgage market, spreads will tighten if the Fed does not slow down mortgage buying, but they would widen if the Fed cuts out more than USD 5 billion a month, Briggs said.

“I had essentially eliminated long dollar positions going into this event,” said Nordvig, who expects USD 10 billion in tapering. Nordvig said if the taper is small the dollar should not move higher but any surprise would move markets. “If they don`t taper, we will have a big reaction in the 10-year… in that situation you`ll get a pretty violent market reaction. I think emerging market currencies would move dramatically – we`d gap higher in most EM currencies.”

Ward McCarthy, chief financial economist at Jefferies, said based on the economy`s spotty performance it doesn`t make sense for the Fed to announce tapering at this week`s meeting, though it may do so anyway. “They`re going to have to lower their growth projection for 2013. That`s another reason you scratch your head. Can they lower their growth forecast and taper at the same time? While they lower their growth rate forecasts, they`ll probably lower their unemployment forecast,” he said.

(Read more: Relax. The markets aren`t running on QE anyway)

Stocks pushed higher Tuesday, with the S&P 500 within five points of its all-time high. The SandP 500 was up 7 points at 1704, its first time above 1700 in six weeks, while the Dow was up 34 points at 15,529.

Scott Redler of T3live.com said the market is in a similar position to where it was on May 22 when Bernanke raised the idea of tapering this fall. “We pushed through the day`s high of 1687, put in a high of 1697 and closed on the lows. That was a signal of an outside day. That was a signal where we started the corrective process,” he said.

“Now, we`re sitting basically at 2013 highs,” said Redler, who follows the market`s short-term technicals. “It`s going to be that same type of tug-of-war action. The year`s high was 1709. We closed at 1704. Longs are scared to be in, and shorts are definitely scared if they`ve been rolling them up. It makes an uncomfortable trade on both sides of the tape and we`re up 4 percent for September alone.”

But if all goes as expected with the Fed, Redler does not expect a negative reaction. “Here we are. They`ve been talking about it since May and here are the real steps. I think the street priced in USD 10 to USD 12 billion taper. If [the Fed does] that, the market should react well,” he said.

(Read more: Art Cashin and the `rationality put`)

Redler said the 1709 high is an important level. “We`re in the same market we`ve been in all year, which is buy the dip. Sell offs have been shallow…as for traders, if we power through that level, some people are still short from the August lows.” That would push shorts to cover, sending prices higher.

Besides the Fed, traders will be watching two economic reports. Durable goods are released at 8:30 a.m. ET and new home sales are at 10 a.m. Energy Information Administration oil inventory data is released at 10:30 am.

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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

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One in eight workers believe they can’t afford to retire

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

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Nearly one in eight of the world’s workers believe they will never be able to afford to retire fully while millions of people are not financially prepared for life after work, according to international research by HSBC.

The UK tops the league of workers expecting to have to work into their retirement in HSBC’s “Future of Retirement” survey, with one in five Britons believing that they will never be able to stop working. That is closely followed by the US and Canada where 18 and 17 percent of people respectively think they will have to work indefinitely.

By contrast, only 5 percent of people questioned in Brazil thought they would have to continue working into old age.

The survey of 16,000 people in 15 countries highlights the changing global retirement landscape as economic pressures and longer life expectancy force people to work longer.

Those who are living alone in retirement are most likely to see themselves working into old age, with 36 percent of those who are divorced or separated in the UK expecting to work indefinitely, compared to just 20 percent globally.

(Read more: Pandemic of pension woes is plaguing the nation)

The survey comes as a UK study by the government’s pension minister Steve Webb warned last week that the pension gap was widening, with up to 13 million Brits heading for an austere retirement after not saving adequately during their working lives.

HSBC’s study confirmed such concerns, with two-fifths of retired people surveyed in the UK reporting that they had either made no financial plans or were inadequately prepared for a comfortable retirement _ with 35 percent of them only realising they were underprepared after they had retired.

(Read more: If Detroitcuts pensions, will your city be next?)

Despite lamenting the lack of preparation for their retirement, the survey revealed that Brits were far more resigned to a dotage lived in financial hardship than their global counterparts. Just 2 percent of people in the UK said they would return to work to address any financial shortfall, compared to 44 percent globally.

With UK life expectancy a long 80.75 years and the average retirement age of 65, a significant amount of people are working longer, however, with data from the Office on National Statistics (ONS) released last week showed the number of older people aged 65 – 74 who were economically active had almost doubled in the last ten years to 16 percent.

HSBC’s report found that 37 percent of UK respondents approaching retirement age actually looked forward to filling their days by working longer.

(Read more: Company pensions in peril as shortfalls hit record)

“People want to slow down in later life and, while some welcome the chance to stay economically active, many may not. Whereas some people regard a comfortable retirement as a natural entitlement, for a growing number this is not the case,” Christine Foyster, head of Wealth Management at HSBC, said in the report published on Wednesday.

If today’s workers wanted to avoid working during retirement, they “should prepare for retirement as early as possible to have some certainty,” Foyster warned,.

Almost half of UK respondents said that weren’t able to realise retirement plans due to a lack of financial foresight when they were younger.

Showing that some things never change, only 15 percent of today’s 25-34 year olds think they will have to work in old age despite life expectancy expected to have reached 91 by 2030, according to the UK government.

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Why US recovery may send treasurys, dollar crashing

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

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The Federal Reserve’s expected move to scale back monetary stimulus signals that the US economy is gaining traction, but some economists argue that the good growth story is precisely why things look bad for the dollar and bond markets.

“The biggest threat we are facing might be economic growth,” Axel Merk, chief investment officer at Merk Investments, told CNBC. “Every time we’ve had good economic indicators in the US pop up, bonds have fallen pretty sharply.”

Read more: Here it comes: Are you ready for the Fed to taper?

And if growth kicks into high gear, governments will need to pay higher interest on their debt, which would be negative for dollar and debt, he added.

“Bonds are going to fall off the cliff because government deficits are going to be very difficult to sustain,” he noted. While central banks such as the Fed and the Bank of Japan may step in to put a lid on yields, currencies will suffer, he added.

According to Peter Schiff, CEO of Euro Pacific Capital, the recovery that the US economy is experiencing “is built entirely on the foundation of housing and stock-related wealth,” and aggressive tapering will bring the end to “phony wealth” and the US economy “back in recession.”

“[The Fed is] afraid that just the beginning of the taper might be the beginning of the end, because the bond market might get killed, which means interest rates rise for the government, mortgage rates rise for the homebuyers, and that’s it for the recovery,” Schiff said in an interview on CNBC.

Read more: Fed taper likely to be announced this week: El-Erian

Merk notes that the US dollar’s delicate situation is exacerbated by the fact that its status as a reserve currency is slowly being eroded.

“When crises have flared up in recent times, the euro has benefited more,” Merk said. He believes neither bonds nor equities offer decent investments and is shifting toward cash and out of the dollar.

But, some analysts believe the outlook of the dollar is sound, even though its strength may be undermined by capital outflows in the near term.

Read more: Why tapering doesn’t mean QE is going away

“Eventually we expect higher US yields to attract foreign flows, especially from Japan as lifers etc., boost their holdings of US Treasurys,” said Mitul Kotecha, global head of foreign-exchange strategy at Credit Agricole, in a note.

He expects the US dollar to resume appreciating in the fourth quarter and next year.

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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 anyone listening? The truth about conference call

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

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Be honest, how many of you have slacked off or even wandered off during a conference call? If the answer is a resounding ‘yes,’ you are definitely not alone.

Over half of the participants in a survey of professionals working in Singapore’s financial services industry admitted that they don’t pay attention during conference calls.

The poll – called ‘The Money Never Stops’ – was conducted by career website eFinancialCareers. It polled workers in the city-state’s financial services industry during the month of July, receiving over 1,700 answers.

According to the survey, one in five respondents has dialed into a conference call while taking a second phone-call or lying in bed. About 25 percent have dialed in while commuting, and one in ten individuals has participated while out shopping.

“When you have a lot of people during a call and if it doesn’t stick to agenda, it’s easy for people to go off task,” said Kelly Teoh, a Singapore-based market strategist at financial services firm IG.

“Any type of meeting that’s not face-to-face, you tend to put stuff on mute when it’s not your turn. It’s a good and bad thing,” Teoh added.

Some of the more interesting locations that individuals have taken calls from include the golf course, the toilet and the shower.

“Clearly though some people really have taken it to the extreme, so luckily there’s a mute button,” said George McFerran, Managing Director APAC at eFinancialCareers.

The survey’s main take-away? The nation’s financial industry can lay claim to having some of the nation’s highly accomplished multi-taskers.

Read more: Culture of long work hours entrenched in Asia banks)

Still using an office phone? How quaint, and primitive

Office robots: No more hiding from the boss

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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

Nearly half of global employees unhappy in jobs: Survey

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

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With nearly half of the world’s employed population unhappy in their jobs one can’t help but wonder: What ever happened to job satisfaction?

According to staffing agency Kelly Services’ annual survey covering 120,000 respondents globally, a staggering 48 percent of employees are unhappy in their current jobs, up from 47 percent the previous year.

A combination of factors is dampening sentiment, including headcount reductions, smaller bonuses and fewer benefits as companies cut back on spending.

“The macroeconomic environment has manifested in the policies of companies. The decrease in headcount means, in some cases, one person has to do the work of two. That’s caused some dissatisfaction,” said Mark Hall, Vice President and Country Manager, Kelly Services Singapore.

“The macroeconomic environment has manifested in the policies of companies. The decrease in headcount means, in some cases, one person has to do the work of two. That’s caused some dissatisfaction,” said Mark Hall, Vice President and Country Manager, Kelly Services Singapore.

“There’s also a lack of security in their jobs, with employees constantly thinking about what they need to do to retain their work,” he added.

With such a high level of dissatisfaction, it is no surprise that 43 percent of respondents said they frequently think about quitting their jobs, compared with 37 percent last year.

In fact, almost half of the respondents have changed their employers in the past year, with the greatest rate of job change in the EMEA region at 51 percent, compared with 45 percent in the Americas and 42 percent in Asia Pacific.

By country, however, Australia saw the highest rate of employees switching jobs at 62 percent – a reflection of the rebalancing taking place in the economy as the mining boom fades.

Emerging markets such as South Africa, Indonesia and India, by contrast, had the lowest rates of job change. “For developing economies like Indonesia, which are climbing upwards and have lots of [foreign direct investment] coming in, there’s a feel good factor as more opportunities are created,” Hall said.

Different perceptions towards jobs existed not only amongst countries, but generations too, the survey showed.

For “Baby Boomers” and “Generation X,” a good work-life balance was ranked the top factor influencing job choice. But for “Generation Y”, personal growth and advancement was regarded as most important.

“Generation Y want it all. Because of the information age, they are aware of the opportunities out there, so personal growth is high in their agenda,” Hall said. “For Gen X, a lot of them are looking at work life balance as they have families, so there’s a different level of commitment.”

Read more: Employment gap between rich and poor highest on record

A Third of UK Employees Unhappy in Their Job: Poll

Americans Hate Their Jobs, Even With Office Perks

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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

400 richest Americans now worth $2 trillion

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

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The 400 richest Americans are now worth a combined USD 2 trillion, according to Forbes.

That sets a record, Forbes said, and marks a jump from last year`s total of USD 1.7 trillion.

The average net worth of a Forbes 400 member is now USD 5 billion-also the highest ever. And the costs of being part of the 400 Club rose to USD 1.3 billion.

But it`s the USD 2 trillion number that remains the most interesting. The 400 richest are now worth more than the GDPs of many nations-and they are worth more than most governments spend or tax.

Here is some perspective on what the 400 richest Americans are really worth.

• USD 2 trillion is more than the combined net worth of half of all Americans. The bottom half, of course.
  
• USD 2 trillion is more than the annual GDP of Italy, Mexico or Canada.
  
  
• USD 2 trillion is equal to the Federal Reserve’s holdings of publicly traded US Treasurys.
  
  
• USD 2 trillion is the estimated size of the underground economy, mostly unreported income.
  
  
• USD 2 trillion would fund all government spending through July of this year.
  
  
• USD 2 trillion is equal to about two-thirds of all taxes to be collected in the US for 2013.
  
  
• USD 2 trillion would pay for all of the existing home sales in the US in 2012 AND2013 year-to-date.

-By CNBC`s Robert Frank. Follow him on Twitter @robtfrank.

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

Australia’s post-election cheer may prove short-lived

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

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Market euphoria has driven Australian shares to fresh multi-year highs but some analysts are warning that the factors that weighed on equities earlier this year haven`t really gone away.

Post-election cheer has seen Australian stocks rally 1.7 percent since the federal elections were called on September 9, while the Australian dollar has risen 1.6 percent.

News that Larry Summers dropped his bid to succeed Ben Bernanke as Fed Chairman added fuel to the fire, sending Australian shares to their highest level on Monday since May 2008.

But some analysts warn that the recent positivity could be premature.

“Yes Australia`s currency and its stock market have had a good time… [but] there isn`t a strong macro story for Australia at this juncture,” said Vasu Menon, vice president of wealth management at OCBC bank.

Sentiment surrounding the Australian economy has turned markedly bearish this year amid speculation of a peak in the country`s mining sector, slowing demand from major trading partner China and ongoing political uncertainty.

However, more positive economic data out of China in recent weeks coupled with the euphoria of a new Liberal National coalition government have started to fuel hopes that the economy could be getting back on track, leading to gains for the domestic stock market.

But OCBC’s Menon, who remains unconvinced about the stabilization of China’s economy, thinks Australia is on course for more pain.

“Despite the recent [positive] data [out of China] you have to put into perspective the economic picture in China. It`s slowed down significantly from two to three years [ago],” he said.

“The new government appears intent on ensuring greater social equality, that corruption is weeded out, and that the banking system is strengthened. I think that means slowing growth for China in the coming quarters and a slower China might not be the best piece of news for Australia,” he added.

Other analysts were also concerned that investors might be underestimating the extent of China`s slowdown.

Rob Aspin, head of equity investment strategy at Standard Chartered advised investors to trim their positions in the Aussie dollar as a result.

“China will be marginally weaker than the market expects and that will obviously impact the Aussie dollar,” he said.

However, Alistair Chan, economist at Moody`s Analytics, said he believed China`s economy to be recovering. He expects China`s gross domestic product growth to exceed the government`s 7.5 percent target this year.

“Regarding China I think the business cycle is turning up. The commodity cycle, as defined by both import volumes and prices, also appears to have troughed. Whether this leads to higher profits for Australian companies and hence higher stock prices is hard to tell,” he said.

But Chan said it was important to note that Australia`s economy and stock market were not completely reliant on growth in China alone.

“The biggest drivers of the [Australian] stock market are domestic factors, such as monetary and fiscal policy,” he said.

Australian stocks traded around 0.1 percent higher in Asia trading on Tuesday.

-By CNBC`s Katie Holliday: Follow her on Twitter @hollidaykatie

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