We are stuck in the trade war and no one seems to foresee any clear path. Actually, before the US-China trade war was on everyone’s mind, the biggest fear facing the global investors should be rising interest rates.
Federal Reserve Chairman Jerome Powell emphasised that the economy is doing very well in June 2018. Some say that the Fed is going to act because of the US job market and inflation instead of the political news. In other words, if the trade wars have no impact on the US job market and inflation, the Fed will keep rising interest rates and two more hikes in 2018 are coming. Furthermore, the Fed has so many reasons to keep rising interest rates gradually. And I believe that the Fed plans to keep hiking even though the risks of trade war mount.
We are going to see that rising interest rates and trade wars will happen at the same time! Are you well prepared for that?
The US president Donald Trump just announced that he is preparing another round of tariffs on Chinese goods which worth USD 200 billion. China’s Commerce Ministry responded that the upcoming round tariffs were unacceptable and warned that China would strike back against US with countermeasures. However, China has not yet provided any details about the tit for tat actions till now.
What Trump is going to do as the US president is spending $10 to make China losing $8. It is not just a trade war. It is a war! The US president just focuses on making China loses money. So, you should never think you are clever enough to gain in stock markets right now. Keep Cash!
Is it a time to get into or out of the stock market?
After the US-China trade war escalated last Friday, the stock markets in US and China remain silent. And some of my friends are just curious about is it a time to get into the stock markets again. In my opinion, it is so difficult to predict how politics factors affect the stock markets and economies.
While the stocks markets have a lack of information and directions, individual investors should be careful. As China’s economy is slowing and fewer investments opportunities, I do not see any reason for buying stocks in China. Actually, we should reallocate our investments assets instead of putting too many eggs in one basket.
Stock markets in Hong Kong and China are still shuffling today. Individual investors should take a wait-and-see approach instead of buying more stocks.
If the stock prices keep going down, the bubbles of the real estate markets in China and Hong Kong will burst. The real estate prices are unaffordable for many people in China and Hong Kong for so long. For users, it is not a perfect time to buy flats with mortgage loans this year. Furthermore, if the bearish markets eventually happens in China, that will be the first time for people in China to face financial crisis since the reform and opening-up policy in 1978. Will China’s government have enough experiences to tackle the economic bubbles and collapse? China’s government is considering RMB devaluation to fight against the US tariffs. However, the officers may need to consider the impacts of monetary policy on the baby boomers retirements very seriously. If the assets in China are forced to devalue, that will become a big issue for social stability in China.
Trade war anxiety is spreading in the stock markets especially in the US, China and Hong Kong.
While China’s government has unleashed $108 billion in reserve cut for most banks, the stock markets in China and Hong Kong are still shrinking surprisingly. And Hang Seng Index and Dow both have nearly 10% decline from previous highs. Some greedy individual investors just cannot wait to buy stocks in this bearish sentiment. However, for the major investors, they are looking for not less than 20-30% gains from the stock markets.
Assume Dow will increase to 26,000 points and HSI will get back to 32,000 points in the future, the stock prices will still have 10% or more corrections and there is still a period of time to be patient.
When the trade war tensions escalated, investors should stay away from Chinese stock markets, especially Hang Seng Index.
Last Tuesday, HSI tanked nearly 700 points and plunged around 2% after US president Donald Trump threatened new tariffs on Chinese imports. And today, HSI drops 1% even though China’s government released 700 billion yuan in cash to markets. We will see that the major investors are not going to buy more stocks from HSI and actually they might already locked in profits before the large fall. While Xiaomi opens its retail book today, I may suggest individual investors think twice before subscribing during a bearish market sentiment.
The stock market is a device for transferring money from the impatient to patient. Be patient!
In Hong Kong, real estate prices are sky-high. As the housing prices keep rising, some hongkongers just cannot wait to buy flats while some are worrying about they cannot afford to buy.
Let talk about the real estate phenomenon in Hong Kong. Firstly, the prices are at an all-time high. Secondly, most of the latest apartments are micro flats which are less than 200 sq ft and too small to live. Thirdly, many investors target to gain from property market.
If you were Hongkonger, would you buy a flat in Hong Kong? Some may say “Yes” as there seems to be no reason for property prices to plunge. However, I may say “No” for this decision now. In my opinion, the prices are too high and are absolutely not affordable for local Hongkongers. And that is the reason why Hongkongers try to buy properties in Japan, Taiwan and other East Asia countries. Furthermore, one of the reasons why the property prices keep rising is the hot money from China. Those investors do not plan to live in Hong Kong and they just want capital gains. They must lock in their profits by selling and they are waiting for the perfect time. Property investment is different from stocks/funds/commodities investments, property is illiquid and it would take time to sell in order to raise cash and release capital. While the US escalate the trade war with China, and it may trigger the Chinese investors to sell their properties. Just wait for the bubble burst in Hong Kong property market which is going to happen in 2018.