Message from Coach
On this week’s market summary:
1️⃣Laos faces a growing risk of debt distress and sovereign default, according to credit rating agencies and economic advisers, as coronavirus and a debt-laden power sector take their toll on one of Asia’s poorest countries. The country’s foreign exchange reserves have fallen below $1bn, less than Laos’ annual debt payments, and ministry of finance officials have asked China, the country’s biggest creditor, for advice on a possible restructuring, the Financial Times has learnt. 2️⃣US banks are increasingly worried about being repaid on loans secured against commercial property, as offices, malls and hotels continue to stand empty. The darkening outlook of banks is laid bare by disclosures on so-called criticised loans, which are flashing warning signals about a borrower’s ability to pay. Among the 10 banks with the largest increases, criticised loans rose by 62 per cent in aggregate in the second quarter, but criticised commercial real estate loans rose by 144 per cent, to $26bn, according to an analysis by the Financial Times.
3️⃣Daily news headlines can lead us to believe that, of the two, coronavirus is the dominant force for markets. The coming months are likely to show that it is not. Investors should back central bankers to win this tug of war and set up their portfolios accordingly. Policymakers around the world responded to the pandemic with unprecedented scale and speed. While they continue to support riskier assets, such as stocks and corporate bonds, through vast asset-purchasing programmes and rock-bottom interest rates, the most important thing investors can do is to stay invested. In particular, we think the UK and German equity markets are likely to outperform, even though we expect Europe’s overall earnings recovery to lag other regions.
4️⃣China’s lenders reported large declines in net profit for the first time in decades Sunday, citing dire economic conditions fuelled by Covid-19. In preparation to deal with ballooning bad debts and future losses, provisions rose sharply by 656 billion yuan ($95.8 billion) for souring loans. Prudent as that may seem, the worst is yet to appear.
One of the must-ask interview questions for banking and finance is: “Have you read any news recently?”, with the follow-up questions: “How would you link this news to the market and what investment suggestions would you give to your clients based on this news?”
Showing your market sense and ability to provide feasible investment ideas would help to differentiate you from other candidates. Therefore, apart from the weekly news update / investment insights, we have also generated this Weekly Market Summary for you to have a quick understanding of the market development and tips to answer some hot discussion topics.
Take a look of the summary and WhatsApp us in the group if you have questions.