February 2016 || Newsletter

Investment Perspective
Global financial markets were under considerable stress all through January as market sentiment was negatively impacted by the selling pressure on Chinese assets and the sharp drop of oil prices. The correction of equity markets was widespread while risky credit instruments suffered from the significant widening of their spreads. Under these conditions, the best performing assets unsurprisingly included government bonds of the developed markets, gold and the Japanese yen until the Bank of Japan unexpectedly announced the introduction of negative interest rates.

In many ways, the behaviour and the drawdown of global equity markets were similar to those observed last August following the devaluation of the renminbi. During the first trading week of the year, China’s stock market was suspended twice on concerns about capital flight and the health of its economy. China’s securities regulator then suspended the new circuit breaker mechanism that was at the centre of its market unrest. This decision, added to poor communication, only contributed to intensify investors’ concerns as the market turmoil in China spread to the rest of the world.

The other destabilizing factor for financial markets was the ongoing weakness of oil prices, whose correlation with equity prices has been rising significantly. Concerns about oil demand were fuelled by disappointing manufacturing figures at a time when hopes for co-ordinated output cuts appeared remote.

Newsletter summary

  • The steep decline of bond yields
  • A positive month for gold
  • Key Data
  • Investment Strategy
  • Portfolio Activity/News

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