Tag Archives: Greece

Crisis in August and the role of China in the current markets

This summer was especially stormy in the financial markets. The cocktail joined two ingredients:

  • First of all, the unending Greek crisis, which played its last show in July after the failed referendum. It is still doubtful if the last bailout will solve the problem or just delay it.
  • Secondly, the Chinese crisis. This is more important, as it showed that China has already a big influence in the world economy and finances. As it is explained by The Economist, the world became nervous. China is already a very relevant benchmark for investors.

The Chinese crisis has shown that the development in the world second (for a short term) largest economy is still weak, as it needs the strength of several institutions and mechanisms, besides its own model. The surprising devaluation was the signal that investors had to flee. However, as the T-Report chart shows, the performance of the Shanghai market is 41% higher compared with August 2014.

1-year chart of Shanghai Exchange

The problem is not limited to China, because the country is one of the main debt holders, commodity consumer and investor in emerging markets. As the dominoes, the pieces begun to fall:

  • The price of commodities is in the lowest point for years.
  • The emerging countries set the alert, as the outlook is that the Chinese commodity demand fall. Then, market evolution and economic forecasts began to be quite negative.

In the middle of this storm, the Federal Reserve showed doubts about the anticipated decision of hiking the rates. Under the current market conditions, the monetary institution thinks that this decision could be worse for future economic developments.

But the question for a common investor is: what can I do? Debt from developed countries offer low interests, developed exchanges drop and emerging exchanges, which formerly could help as an alternative, are even worse. Even China, which sailed in the middle of the Great Crisis with some success, shows its feet of clay. Then, what?

Comparative T-Advisor chart with 4 main exchanges

An investor strategy should be focused on capital preservation. These were our results in the T-Advisor European model portfolios, following this strategy:

Exchange

Loss in the last 30 days

Model portfolio loss in the last 30 days

DAX

-12.47%

-6.22%

IBEX 35

-11.3%

-7.42%

FTSE 100

-9.34%

-0.94%

The only solution in the current market turmoil is clear: good information about assets, tools to select the best ones, rebalancings and a strategy centred in capital preservation to reduce possible losses.

Global market trends: markets in the second quarter

Trends in the second quarter of the year have been dominated by the Greek crisis. After the election of left-wing party Syriza, Greece and the UE tightened the negotiations about the payment of the debt. The result is already known: Greece defaulted the IMF. The crisis is not only for the Greeks, but also for the whole European system, as one of the partners of the Euro did not follow the established rules. What will be the next? Referendum in Greece? Grexit? New elections? The future is more open than ever. We can read several articles in the media with both positions blaming the troika and the Greek government for the current situation.

Regional global trends in T-Advisor

Generally speaking, there are some differences between the market evolution in US and Asia, on one side, and Europe and Latam, on the other side. The evolution in Europe swung depending the news around Greece, what has altered a regular trend: sudden ups and downs happened when somebody came with a new statement or rumour. Above all, investors in Greece did not experience the best results, as this T-Advisor chart shows:

5-year Greek stock exchange evolution

In Latam, the troubles in the stock exchanges are linked with the strength of the dollar. These countries are very dependant from commodities and exports are being punished by the strong greenback, that rises against all currencies as the Euro weakens and the US Federal Reserve considers hiking rates.

The more positive regions are US and Asia, but the improvement in the markets has also shadows. Asia is the region where there are more alerts. The overheated Chinese stock exchange in this year has begun to fall severely. Recent measures, as a rate cut, were not enough. Shanghai has felt a 25% since the peak on June, the 12th, and the effects are still to watch.

5-year Shanghai stock exchange evolution

Finally, US plays with strong figures and the stock exchanges are counting them. However, there are still doubts about a possible rate hike, because the Federal Reserve stated that they need more evidences about the improvement of the labour market. The next job reports in US can be decisive to preview the chances of an increase of the rates, which will can move strongly all markets (stocks, debt and currencies). Well, investor, be ready, because the road has bends.

Market opportunities by T-Advisor: Aegean Airlines

T-Advisor, through its tool Market Opportunities, has detected the company Aegean Airlines, listed in Athens Stock Exchange, as an opportunity for investment.

These are the main figures about performances and volatility in the last years:

Aegean Airlines main figures in T-Advisor

The chart shows the evolution in the last year:

Aegean Airlines chart in T-Advisor

The technical analysis reveals also more data:

Aegean Airlines technical analysis in T-Advisor

Finally, the risk analysis is as follows:

Aegean Airlines risk analysis in T-Advisor

Aegean Airlines was the first private airline company in Greece founded in 1992. It is a regional airline, covering domestic flights in Greece. It is part of the Star Alliance Network, led by Lufthansa and United Airlines. The fleet is composed by 50 aircrafts, mainly Airbus.

Despite the economic crisis in the country, Aegean Airlines increased its revenues a 21% in 2013, till €682 million. Net profit turned into black figures in 2013, till €66.3 million, after the losses in 2012. The company had to deal in 2013 with losses from Olympic Airlines, a company which was purchased that year. The share multiplied its price five times since the summer 2012. Now it is near the peak reached last year in May.

Global market trends: markets in January

This year has begun with the markets playing hard rock. The list of figures and events is long and all of them have effects on the markets. Obama declared the end of the crisis, radical left won in Greece, ECB began the European QE, China grew at the lower pace since 1990… Impossible to miss!

First of all, it is necessary to take into account a point in macroeconomics. IMF reduced its world growth outlook for 2015 last month. Amongst the risks, it is found the cheaper oil prices. Why? Yes, it pushes consumption and reduces industrial costs, but it can feed the deflationary trend. Deflation is very risky, as people tend to postpone investments’ and purchases’ decisions. Current price is around $50, but the pressure from Arabian producers could push it to a lower bar.

Global market trends in January in T-Advisor

Several experts have already warned that 2015 would be an unstable year for economics. However, US President Obama said in his State of Union address to the Congress that the economic crisis was over. American economy has experienced a recovery, but Federal Reserve is still reluctant to increase rates, as it does not perceive inflation risk. Although observers tend to think that the American central bank will hike rates in summer, it is still soon to have a clear perspective about that decision with the current instability.

US global trend in T-Advisor

In Europe, the ECB did finally what many economists recommended some months, even years, ago: an expansive monetary policy printing money. The European QE will expand ECB balance in €1 trillion, but effects will take at least six months. In any case, markets make their own party, till Greeks voted the radical left party Syriza in the last election. New Greek prime minister declared his intention to negotiate the country debt, but European partners do not agree. Markets have suffered abrupt ups and downs. Another point of instability was the Swiss National Bank decision to unpeg its currency from euro, which was not expected by investors.

Europe global trend in T-Advisor

Latin America is still the weakest world region. As the IMF comments, these countries are very dependent from oil and commodities. The current negative price trend for these products is punishing the market evaluation about the region.

Latin America global trend in T-Advisor

In Asia, China registered the lowest growth (“just” 7.4%) since 1990, which can show some weaknesses in its develop. These figures have partially stopped the soared trend since People’s Bank of China reduced its rates in November. In Japan, recent election victory by prime minister Abe guarantees that his expansive economic decisions will continue, but it is to see if they have effects after 25 years of weakness.

Asia global trend in T-Advisor

 

Global market trends: markets in the beginning of 2015

The beginning of the year in markets is all except quiet. After the traditional rally at the end of December, the global market trends are very open: ups and downs in an unstable landscape. There are some reasons that show that risks are increasing, mainly: oil, euro and Greece.

Global market trends in T-Advisor in the beginning of 2015

What is happening with the oil price? There is a fight amongst producers, mainly OPEC countries and USA. Americans become the world largest producers thanks to fracking techniques and OPEC countries wants to be still influent and keep their market share. Winners? Consumers, carmakers, chemicals and many industrial sectors. Also general world economy, which will increase a bit more due to the oil price drop. Losers? Oil companies and some weak producers as Russia or Venezuela. Dropping oil prices (-55% since the last peak) are affecting deeply Latam stock exchanges, because apart from Venezuela, other countries as Mexico, Brazil and Argentina are also oil producers.

The other instability front is Europe in two ways: first of all, the euro is falling against other currencies. Above all, the most important exchange, the US dollar, accounts today a drop of 15% since the last peak in May 2014, when it reached $1.39. Yesterday, the doors were more open to a possible monetary quantitative expansion (QE) by the ECB, in the same style as the Federal Reserve did. What does it mean? More euros in the market and a lower exchange. This will be better for exports, but it deepens in the discussion about the ECB role and the risks of buying European debt with money from the Central Bank. However, the Eurozone closed 2014 with a -0.2 % negative inflation and some are afraid of a possible deflation process… or even a similar process as in Japan.

Last risk is Greece, again. An internal political crisis linked to the election of the President of the Republic has led to new elections. Traditional parties (centre-right New Democracy and centre-left Pasok) have governed in coalition last two years. Now, the risk is a new left party, Syriza, which promotes in its political programme the renegotiation of the Greek debt. Who are the main creditors? Germany and other European countries.

In the other side of the world, despite the slowing China, other countries show strength, as India. Yesterday’s Bank of India cutting rate decision boosted the stock exchange and consolidates the perspective of opportunities in the country.

In any case, generally speaking, the unstable landscape because of the above-mentioned reasons opens several doubts about the improvement of the world economic recovery.

T-Advisor global trend in Europe

T-Advisor global trend in USA

T-Advisor global trend in Latam

T-Advisor global trend in Asia