BlackRock has a “positive” view on the domestic bond market in China, said Neeraj Seth, the U.S. investment giant’s head of Asian credit. “We still see …
SINGAPORE — China’s massive onshore bond market offers investors a level of returns that may be hard to find elsewhere in the current environment of low interest rates, a BlackRock portfolio manager said on Thursday.
The U.S. investment giant has a “positive” view on the domestic bond market in China, where economic data and continued monetary policy support point to a sustained economic recovery, said Neeraj Seth, BlackRock’s head of Asian credit.
Low-interest rates are causing investors to buy riskier assets than they normally would seek out, according to BlackRock’s Isabelle Mateos y Lago.
The global head of BlackRock’s official institutions group told Bloomberg on Wednesday, “Portfolio construction is being completely taken back to the drawing board because people understand we’ll face these low interest rates for a long, long time into the future.”
Mateos y Lago said she’s seeing global investors and asset owners move away from traditional safe-haven assets and into riskier ones like illiquid investments, alternative investments, high-yield bonds, and emerging markets bonds, particularly from China.
These assets are providing yield, but “for a lot of asset owners, these are investments that they would have never contemplated historically, because of their risk parameters.”
Traditional safe-haven assets no longer provide a portfolio with yield or resiliency, she added.
“You obviously always need some safe government bonds in a portfolio, but the notion that they’re going to play as big a role as they did in the past when rates were much higher and you had both yield and protection — that idea is fanciful,” the strategy chief said.
Tommy Tsang, a money manager with Alpha Sherpa Capital in Hong Kong, said he began shorting, or betting against, Evergrande shares on Friday …
China Evergrande Group’s bonds and shares came under a second day of heavy selling pressure on Friday, as investor concerns grew about the large property developer’s financial health despite its attempt to calm such worries.
The company’s shares tumbled to a fresh four-month low and its dollar bonds sank to distressed levels, after a major credit-rating firm cut its outlook on Evergrande and unverified documents about the company were circulated online.
… today which tells me, investors are nervous in spite of the slew of good news with the Nvidia (NVDA) merger, vaccine hopes, and a China rebound.
Although a 10-15% stock market correction is normal, the bigger question is whether the bounce we just saw from recent lows is a sell rather than buy opportunity?
Both the Nasdaq 100 and S&P 500 Indices are trading into resistance.
For the S&P 500, that number is 342. For the Nasdaq 100, we are looking at 282.
The Dow Jones Industrial Average has to hold 28,000.
Interestingly, volatility also closed green today which tells me, investors are nervous in spite of the slew of good news with the Nvidia (NVDA) merger, vaccine hopes, and a China rebound.
Furthermore, the Federal Reserve meeting minutes will be released Wednesday.
The expectations are for a dovish stance.
What interests me is what they say about their plan for getting inflation up, which has yet to be defined.
Is there a possibility of another severe market correction this year?
Without a stimulus plan from the government, although I believe it will happen in the final hours before the election, the stock market will get hurt.
Plus, the election and rising protests could hurt if the violence increases.
Moreover, a second wave of COVID is the most frightening possibility.
So, what should investors watch for now?
The outliers are still the best “tell.”
Junk Bonds (JNK etf) have to hold around 104.80. High grade corporate bonds (LQD etf) should hold 135.50.
Perhaps the most important outlier is what happens to the dollar. A move in DXY or the dollar continuous contract under 92.80 could spark more buying in the commodities, but also more fear about the recent rally in the Chinese Yuan.
Volatility is yet another key as the index held the 50-DMA and over 26.00 could be an early warning sign.
For now, I am still very bullish in gold, silver, and miners.
I am also watching, with no position, a bullish bias in uranium and natural gas.
If the market holds, I still like some of the small cap growth stocks.
For example, I am watching Fastly (FSLY) for a move back over 84.00.
Otherwise, please watch the indices carefully here and if they start to rollover, I would raise stops and take profits on the winners.
Trading Levels for Key Stock Market ETFs:
S&P 500 (SPY) 342 key resistance to clear 338 support then 333
Russell 2000 (IWM) 153 pivotal 150.75 key support
Dow (DIA) 280 pivotal 274 key
Nasdaq (QQQ) 282 resistance 275 support 272 must hold
KRE (Regional Banks) Could not confirm a recuperation phase so back to bearish
SMH (Semiconductors) 171.50 support 175 resistance
IYT (Transportation) Strong relative to the other sectors. Must hold 200
IBB (Biotechnology) Sitting right on the 50-DMA at 135.90
XRT (Retail) 49.00 the 50-DMA
Volatility Index (VXX) Eyes here tomorrow especially if VIX clears 26.00
Junk Bonds (JNK) 104.80 support
LQD (iShs iBoxx High yield Bonds) 135.50 support
Check out this video I did with The Dollar Diva (Debbie) from September 14:
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.