United States 

China and the United States earlier reached the first phase of a trade agreement, avoiding a new round of tariffs on China and Canada on December 15. The news is positive for market sentiment. The three major US stock indexes rose about 1% to 2% in the past 5 days as of this Thursday. In addition to the good news from China-US trade relations, the economic data released by the United States this week is generally satisfactory, including the numbers of industrial production and manufacturing production in November changed from negative to positive. On the other hand, U.S. President Trump's impeachment charge was approved by the House of Representatives. Trump became the third president to be impeached in history. The impeachment case will be heard in the Senate early next year. The US-Mexico-Canada agreement (USMCA) was implemented. The US Senate passed the Domestic Expenditure Act, which supports the government's funding needs throughout the fiscal year. Important data which will announce next week such as the core PCE and the University of Michigan market sentiment index.

Europe

In Europe, the UK Market rise the most. In the past 5 days as of this Thursday, the FTSE 100 index has risen more than 4%, the French CAC index has only increased by 1.5%, and the German DAX index has fallen slightly by 0.07%. After the British Conservative Party won a major victory in the general election, British Prime Minister Johnson also announced the government agenda, saying that legislation would allow Britain to leave the European Union on January 31, and set the implementation period until the end of 2020. The news supported the UK stock market. On the other hand, for the UK's unexpected extension of the Brexit transition period, the EU warned of risks, and the news affected the GBP to soften to about 1.30. In addition, the Bank of England kept the benchmark interest rate unchanged at 0.75%. Next week, the market may focus on the EU consumer confidence index.

China 

China and Hong Kong stock markets generally performed well this week, with indexes such as the HSI and the CSI 300 recorded rise. As for the China-US trade agreement, the US Treasury Secretary stated that the two sides will announce and sign it in early January next year. It is reported that China has re-purchased US soybeans this week, and plans to waive tariffs on agricultural products from the United States in the future. Mainland China's economic data improved this week, and the year-on-year growth rate of production and retail sales in November accelerated faster than last month. The market is concerned about whether the mainland will relax monetary policy before the Lunar New Year, such as lowering RRR or MLF rates.

• Recent activities include : Harris Fraser held a Press Conference on “2020 Global Investment Market Outlook”, Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now  FINTERVIEW”, “iCable Finance”, “iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News”  , “ET Net”, “OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)

The Bloomberg Barclays Global Aggregate Bond Index fell 0.76%, while US Investment Grade, Emerging Markets US dollar, and US High-yield bond indexes rose 0.25%, 0.03%, and 0.33% respectively. As trade tensions continue to lighten over the month, capital returned to equity markets, bringing about the mixed performance. Although according to the recently published Fed Beige Book, the economy is still doing well, lowering the chances of further rate cuts in the short to mid-term, the ongoing quantitative easing in form of the Asset Purchasing Programme and balance sheet expansion should continue to provide support to bond prices.

Equity markets remain volatile and news sensitive. Although the US trade representatives on multiple occasions claimed that the first stage Sino-US trade deal will be signed before the end of the year, but there has been a lack of concrete evidence of that happening. Via the state media, the Chinese government has repeatedly requested for a complete uplift of existing tariffs as a prerequisite for signing the partial deal, which could prove to be an obstacle to signing off the trade deal in the short term. Thus, as we close in the end of the year, we expect that trading volume to thin out and volatility to increase. Taking high quality debt in the portfolio could reduce volatility while enhancing the yield. Investors who want to avoid the temporary market turbulence should consider increasing their bond exposure in their portfolio to improve their risk adjusted returns.

Even though drivers in EM return remained intact, but downside risks have yet to subdue, the trade talk progression could prove to be detrimental to the year-end performance. Our overall EM outlook for the year remains neutral.

With the global inflation rate for major economies staying on the lower end apart from China, EM central banks have more wriggle room in taking advantage of monetary easing in supporting markets. As the trade war goes on, to insulate them from the trade war risks, EM economies are looking for alternative ways out to further advance economic development, mainly through governmental investment and internal consumption. As a recurring theme, we continue to see more non-monetary policies adopted to incite business investment and personal consumption. The Indian parliament just passed the Bill to officially cut corporate tax rates by 8-10%, which could drive the local economy in the mid to long-term by attracting more investments in the fastest growing Asian country.

However with political landscapes getting more complicated, radical reforms are also facing stronger headwinds than ever. In Brazil, the proposed reforms to the public sector and tax system were postponed due to the fear of public backlash, which casts a shadow over the economic future of the country. Other EM economies are also considering to adopt expansionary budgeting, deploying stimulus packages to counteract the effects of the slowing global economy. Other than that, as production lines consolidation continue, beneficiaries like Vietnam and Taiwan should continue to enjoy impacts of the trade war. Investors would need to exercise caution before investing in EM with the heightened risk in general.

The overall economic outlook has improved somewhat, as the official manufacturing PMI came in at 50.2, breaking through the 50 level for the first time in 6 months, Caixin PMIs for both manufacturing and services also improved. GDP growth figures continue in a downtrend, we see the economy slowing down as the growth drivers in the economy falter. Investments fell, most notably in the real estate sector due to government policy emphasis on ‘Housing for living, not speculating’; Consumption is also growing at a slower rate as implied by falling retail figures; While the negative PPI, which has been in a downtrend for 5 months, further hints at weakness in exporting sectors due to the ongoing trade war.

Head of the People’s Bank of China Yi Gang commented on market rumors, stating that the Bank will keep monetary policies normalized and will stay away from currency devaluation, zero interest rates and QE. This fuels speculation that the PBOC will not slash reserve ratios in the short term as authorities might see the current economic growth adequate.

On the other hand, Chinese Vice Premier Liu He said that it is necessary to increase “counter-cyclical” adjustments, implying that there might be more economic support policies and markets remained hopeful. Overall, the fundamentals are seemingly turning for the better, the government stimulus to come might be able to revitalize the economy strained by the trade war. That said, as the volatility increases at the end of the year, investors should keep an eye on any new economic data on changes in the economy.

 The indexes rose in line with the improving global sentiment, but fundamental issues continue to persist in the Japanese economy, as recent economic figures were rather poor. Q3 GDP growth came in at 0.2% QoQ missing market estimates, November Manufacturing PMI continued to stay in the contraction range, corporate confidence remained weak, industrial production went negative again, and retail figures missed expectations. Overall, the short term economic outlook in Japan remains negative. As we have yet to see significant recovery in the Japanese economy, we retain our neutral rating for the market for the remaining portion of 2019.

That said, it was reported that Japan’s Prime Minister Shinzo Abe ordered its cabinet to compile a comprehensive economic stimulus package for the coming year, amounting to a total of USD 120 billion, which is the first stimulus package since 2016. While some might be concerned over the mounting debt load of the island country, the whole package should provide much needed momentum in the stagnant country. If the plan was adopted and carried out in the coming year, we expect the Japanese economy to further grow benefiting from the governmental support. With Tokyo Olympic Games 2020 held in the country, growth drivers are present in the Japanese economy, the outlook for 2020 is positive.

The UK is expected to wrap up the whole Brexit matter that lasted for more than 3 years and hold their general elections on 12^th Dec 2019. The latest polls showed that the Conservatives will likely get around 43% of votes, which is expected to translate to a majority in the parliament. The Cons are poised to regain control of the parliament, the “Johnson Deal” approved by the EU will likely pass though the parliament. A timely Brexit stemming from this will likely further clear up the situation in Europe, politicians can finally move on to more fundamental issues with the economy, climate, society, and so on.

As for fundamentals, the valuation of the European equity markets has been catching up recently, with forward price-to-earnings ratios closing in of that of US equities. With uncertainties cleared, we expect European equities to extend further gains in the short to mid-term via valuation recovery. Yet, the fundamental issues of the economy stays unresolved. Eurozone manufacturing PMI remained in the contraction zone for ten consecutive months, while the German Manufacturing PMI continued to improve, it still stayed in the contraction zone. The Euro Area Economic Sentiment Indicator, a leading indicator of Eurozone economy, slightly recovered to 101.3 in November, it remains to be seen if the downtrend since late 2017 could be reverted. As the fundamentals in the European economy remained weak and showed no visible signs of recovery, we could see a visible but limited upside for the European markets in the short to mid-term.

 Q3 GDP growth was revised up to 2.1% YoY, which further improved market sentiment with positive news over the trade war. Throughout November, it was reported numerous times that the 1^st stage of the Sino-US trade agreement will be signed soon, driving the markets to historic heights.

From the fundamental perspective, the latest Fed Beige Book gave the markets better insight into current market conditions. According to the report, Fed members see the economy expanding moderately and the manufacturing sector has shown signs of improvement with limited inflation pressure. Thus, the Fed is unlikely to change rates in the short to mid-term. Other economic indicators also find that the US economy is showing signs of stabilisation. Apart from the ISM PMI figures, other PMIs regained momentum and rebounded, hinting at a brighter outlook on the US economy.

On the monetary side, the Fed is unlikely to cut rates in December. While this might provide less support to the markets, the ongoing Fed balance sheet expansion will likely continue to boost asset prices across the board. In the past, markets tend to perform better with lower volatility during periods of Fed balance sheet expansions, when compared to periods of flat or reduction in the Fed balance sheet. As QE is expected to continue well into 2020 Q2, we could expect a decent equity performance until then, despite the relatively higher current valuation. The US market remains the go-to equity market with the earnings to back its performance, but caution is always needed in volatile markets.

United States 

Driven by news that China and the US could possibly reach the first-phase trade agreement soon, the global stock market performed well over the week, US stocks continue to hit new historic highs. Over the past 5 days ending Thursday, the three major US stock indexes rose 1.2 - 1.7 %. According to the latest report, Trump has signed the phase one trade deal, avoidd applying the new 15 Dec tariffs on China, further boosting market sentiment. On the other hand, the Federal Reserve just held its last FOMC meeting this year and the interest rate was kept unchanged as expected. The Fed’s Dot Plot after the meeting also showed that members generally believed that the interest rate will be kept unchanged throughout. Fed Chairman Powell said that he is open to the idea of expanding the scope of Fed Balance Sheet expansion, but thinks that this is not the time. The market expects the current easing policy to continue into next year, which could further support equity markets. As for presidential impeachment, the Democratic Party announced two impeachment allegations against Trump, including abuse of power and obstruction of Congressional investigations. Key data to watch next week include core PCE figures.

Europe

European stock markets followed global equities and surged. The major stock markets in UK, France, and Germany rose by 1.3 - 1.9% over the past 5 days ending Thursday. The UK elections stayed under the spotlight. At the time of writing, 379 of the 650 seats were announced. The Conservative Party has the absolute upper hand and has secured 202 seats (48 net new gains). The main opposition in Labor only took 128 seats. The latest exit polls have predicted a Conservative victory with 368 out of 650 seats in the House of Commons won, which translates to a parliamentary majority. The other market focus was the first European Central Bank meeting after Lagarde took office, who was quoted saying that there is more ways of inflation measurement, and policymakers should consider a wider range of economic indicators. The market will continue to follow the latest developments in the European Central Bank's monetary policy.

China 

The performance of China and Hong Kong stock markets this week were rather mixed. Hong Kong equities benefitted from external market conditions and rebounded, while the A-shares performance were muted. It was reported that Trump has approved the first phase trade agreement, coupled with the Central Economic Working Conference’s emphasis on steady growth, drove HK equities up sharply, and briefly challenged the 200-day moving average at the 27600 level. Apart from news of ratifying the agreement, there were also rumours that some US negotiators' proposed to reduce the existing US$ 360 billion tariffs on in Chinese goods by as much as 50%. The Central Economic Work Conference ended on Thursday, demanding improvement in quality and effectiveness in next year's fiscal policy, while the keeping flexibility and appropriateness in a stable monetary policy. The news raised market expectations for positive policy measures next year. Data on fixed investment, production and retail will be released next week.

• Recent activities include : Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019, Attended iFAST’s annual symposium 2019 in Berlin Germany
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now FINTERVIEW”, “iCable Finance”, “iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News” , “ET Net”, “OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)

United States 

Global stock markets showed signs of weakening. Earlier in the week, Trump pointed out that there is no deadline for the Sino-US agreement, implying that the agreement with China might only be signed as late as November 2020. This incident worried the markets that the United States might proceed with the new tariffs on Chinese goods as scheduled on 15th December, killing the last glimmer of hope on a tariff delay. Affected by this, the S&P 500 fell earlier this week, recording the largest single day drop in nearly eight weeks. Over the past 5 days ending Thursday, the three major US stock indexes fell 1.15% - 1.73%. In addition to trade concerns, economic data also weighed on US equities. Data showed that the US ISM manufacturing index contracted for the fourth consecutive month in November, while the ISM non-manufacturing index also fell below the previous value and market expectations during the same period, implying slowdown in both aspects of the economy. Next week, the United States will announce the November retail sales and consumer price index, the market expects that both data show positive results. In addition, the US Federal Reserve will also hold the interest rate meetings, which markets expect rates to remain unchanged..

Europe

While global stock markets dipped, the drop was further magnified in Europe. French and German stocks fell 1.9% and 1.4%, respectively; UK stocks went further down, falling 3.8%. In the UK, as polls in the UK showed that the Conservative Party still maintained the lead, the Pound rose sharply to the 1.3150 level. In addition, UK Prime Minister Boris Johnson also announced his plan for the first 100 days of his tenure, including plans to ‘complete’ Brexit before January 31, providing support to the Pound. In France, there was a general strike, mainly due to dissatisfaction over the government's revision of the retirement system. The European Central Bank (ECB) will hold its last 2019 interest rate discussion next week, the market expects interest rates to be kept unchanged.

China 

China and Hong Kong stock markets performed well. Despite the worsening global market sentiment at the beginning of the week, it was reported that the Chinese side maintained close communication with the US and the stock market rebounded. The mainland stock market outperformed HK markets, CSI 300 index nearly 2% this week, while the Hang Seng Index rose 0.6%. In the absence of a clear breakthrough in trade negotiations, data showed that the Sino-US trade volume further declined in October, and the US merchandise import quota from China also hit a three-year low. China will release CPI data next week, and the market expects the figure to further increase to 4.3% YoY.

• Recent activities include : Attended Bloomberg Businessweek/Chinese Edition Top Fund Awards 2019,   Attended iFAST’s annual symposium 2019 in Berlin Germany
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now  FINTERVIEW”, “iCable Finance”, “iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News”  , “ET Net”, “OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)

United States

It was Thanksgiving and US stock markets were closed on Thursday. Before the holiday, all three major US stock indexes closed at consecutive record highs three days in a row. US President Trump eased tensions over Sino-US Trade talks, reassuring that both sides will reach the 1st stage agreement soon. Moreover, the Q3 finalised GDP of the United States was revised up to 2.1% QoQ, improving market sentiment, propelling the three major indexes up by 1.23% - 2.09% over the 5 days prior to the holiday. The US Federal Reserve Beige Book released this week also reported positive findings, stating that economic activity has expanded moderately and manufacturing has shown signs of improvement. That said, public hearings of the impeachment inquiry will conclude soon, the Democratic Party is considering to raise at least three impeachment charges. In addition, from a technical perspective, the 14-day RSI of the three major US stock indexes are all now above 70, indicating that the indexes are overbought. Next week, investors could pay attention to the US employment reports, ISM manufacturing & non-manufacturing indexes, and the University of Michigan market sentiment figures.

Europe

Global market sentiment improved and European stock markets rose. Over the past 5 days ending Thursday, the British FTSE 100 index rose 2.46%, the German DAX index gained 0.82%, and the French CAC index rose 0.54%. The European Union increased US beef import quotas on Monday, which is expected to help ease trade frictions between the US and EU. As for the UK, the latest polls showed that the Conservative Party has a higher chance of winning in the general election, stimulating the Pound surge over the week. In terms of economic data, the November German consumer price index for released this week rose 1.1% YoY and fell 0.8% MoM, both falling short of market expectations. Eurozone’s October retail sales data will be released next week.

China

Chinese and Hong Kong stock markets recorded mixed performance over the week. The Shanghai Composite Index broke below the 100-day moving average on Friday and tested the 200-day moving average at the 3800 level. As for the Hong Kong HSI, it broke below the 50-day moving average on the same day to around 26300. At the beginning of the week, the HSI was driven by the favorable atmosphere as Alibaba returned to the Hong Kong stock market, on Tuesday intraday the Index even briefly broke above the 27200 level, but it showed subsequent weakness and fell. In terms of governmental policies, when presiding over the meeting of the State Council Finance Committee, Chinese Vice Premier Liu He said that it is necessary to increase counter-cyclical adjustments while deepening the reform of capital markets and small & medium-sized banks. The markets remained hopeful for new economic stimulus policy launch in the mainland. Important economic figures to look out for next week include Caixin China Manufacturing and Services PMI.

• Recent activities include : Attended iFAST’s annual symposium 2019 in Berlin Germany, visit Mason Privatbank Liechtenstein office in Liechtenstein.
• Columns, media interview and online channels : “TVB News”,“TVB Big Big VIP”, “Now  FINTERVIEW”, “iCable Finance”, “iCable News”, “Capital”, “SingTao Newspaper”, “Sing Tao Investment Weekly”, “Headlines News”  , “ET Net”, “OrangeNews”, “Quamnet” and online videos produced by Harris Fraser Group. (including but not limited to the above)