TSS - Major Markets Report, April 2015 - Large Capital Shifts to Emerging Markets

by Michael J. Howell29. April 2015 16:09

Eurozone liquidity is strong and latest April weekly data signals point to renewed Bank of Japan easing, but what really matters for markets is the balance between Chinese and US liquidity: these two economies control more than half of Global Liquidity. Since 2012, China and America's liquidity pumps have been operating at very different speeds, with the US strong and China weak. Now, just as the US Fed is debating tightening policy, China's PBoC has begun to ease. China is more important to the World economy (and Emerging Markets) than the Eurozone and Japan.

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Emerging Markets Latest GLI, April 2015

by Michael J. Howell29. April 2015 15:51

Emerging Market Liquidity rose again in March 2015, reinforcing an uptrend in flows that started around the second half of 2014. The EM Liquidity Cycle looks to be in a Rebound phase. Thus, the EM component of our GLI™ (Global Liquidity Index) touched 29.9 at end-March (‘normal’ range 0-100) from 19.0 at end-February 2015. Although the trend is up, the previous two months encountered some unusually sharp downward index revisions following the re-statement of Asian Liquidity data for January, largely we suspect because of timing issues ahead of the Chinese New Year. The new data suggest a less aggressive recent trend in PBoC easing. Even so, we still see a strong upward direction, fuelled by the current severe Chinese economic weakness. Chinese investors appear to agree that more money is being pumped in.

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April Update - Latest GLI™ (Global Liquidity Index)

by Michael J. Howell17. April 2015 15:06

The Global Liquidity Index (GLI™) increased in absolute terms to 36.7 from 29.7 in February ('normal' range 0-100).

There were some unusual and hefty downward revisions to past data, largely across Emerging Asia, and notably for January 2015, where it appears that the timing of the Chinese New Year distorted the original estimates.Overall, World liquidity conditions remain sub-par, with the index at or below average now for seven months and so providing underlying support to bond prices. Moreover, Developed Markets’ Liquidity (45.9) is sliding from high levels and liquidity in Emerging Markets (26.2) is rebounding from low levels. The picture is consistent with a slowing, but not recessionary, World economy, with now better chances of some business upturn six months ahead. Judging from liquidity, the best we can hope for is a continuing ‘risk-on’ investment environment in the Eurozone and Emerging Markets, and no shift to ‘risk-off’ in the US.

 

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Global Liquidity Latest (GLI March Release)

by Michael J. Howell11. March 2015 09:42

Global Liquidity fell again last month, led for the first time by weaker US money flows. The February 2015 GLI (Global Liquidity Index) dropped to 39.6 from 41.7 (‘normal’ range 0-100) and has been at or below average now for six months. The Eurozone is the major exception. Measured in equivalent US dollar terms, net monthly outflows of Global Liquidity average US$1 trillion over this period, or around 6% of total funds. Falling Global Liquidity warns of future financial and economic risk. Current levels of liquidity do not yet signal recession, but they do point to economic slowdown over coming months and greater market volatility.

 

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Global View - The Global Accelerator February 2015

by Michael J. Howell24. February 2015 15:50

China risk remains high because of the unwind of her massive credit boom. This report analyses the feedback effects on Global Liquidity and highlights the risks of further deflationary forces that may arise if China is forced to 'repeg' the RMB.

 

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Emerging Markets Liquidity-Based Tactical Asset Allocation - February 2015

by Michael J. Howell24. February 2015 15:49

This (new format) report uses latest liquidity data to assess risks and allocate to assets across the emerging markets. It seeks to avoid exposure where risks are greatest. Brazilian investment risks have lately fallen sharply. US risks remain low, but Chinese risks are rising again.

 

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Liquidity-Based Tactical Asset Allocation, February 2015

by Michael J. Howell24. February 2015 15:48

This (new format) report uses latest liquidity data to assess risks and allocate to assets across international markets. It seeks to avoid exposure where risks are greatest. Eurozone and Brazil investment risks have lately fallen sharply. US risks remain low, but in other markets UK, Japan and China they are rising

 

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Global Liquidity in 2014: Bigger, Faster, Stronger

by Michael J. Howell17. February 2015 11:42

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Latest Global Liquidity Index (GLI) January 2015

by Michael J. Howell12. January 2015 19:21
Global Liquidity is starting 2015 on a downbeat. Our GLI index of liquidity conditions stands at 41.8 or down from its 45.9 end-November 2014 reading. Lower Global Liquidity warns of future financial and economic risk. Current levels of liquidity do not signal recession but they do point to economic slowdown over coming months and greater market volatility. Consistent with this picture Treasury yield curves are flattening and corporate credit spreads are widening. Our models are flagging a 'Risk Off' regime.

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Global Liquidity Update

Global Liquidity Index (GLI) December 2014 Update

by Michael J. Howell13. December 2014 20:41
Global Liquidity continues to slip lower. According to our evaluation, investment markets remain locked in the late- cycle Speculation regime, with the strong bond markets telling a story in complete agreement with latest weak liquidity readings. The end-November 2014 GLI (Global Liquidity Index) stands at a slightly below neutral level of 44.5 ('normal' range 0-100) and this largely underpinned only by loose US liquidity (67.3). Developed Market liquidity conditions (47.3) are still better than Emerging Markets (33.2), with the far smaller Frontier Markets seeing sharp liquidity falls over recent months. Latest GLI data suggest a need for alertness among investors and some protection, but we reiterate that the liquidity backdrop looks reminiscent of the 1997-98 period, not (yet) 2007-08. The main risk continues to be a still stronger US dollar, which signals an additional Global Liquidity squeeze because of its key cross-border funding role in the World economy.

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