Weekly Market Recap
China for income
Week in review
- Australian Budget forecast $213b deficit in FY20/21, 11% of GDP
- RBA holds cash rate at 0.25%
- Australia business confidence rises to -4
- U.S. CPI inflation
- Australia consumer confidence
- Australia labour market report
Thought of the week
Last week dovish central bankers were out in force around the world promoting the need for fiscal stimulus to kick-start the economy. Even with the reliance on fiscal spending, central banks themselves may be willing to do more. This guidance will weigh heavily on core government bond yields. To find yield investors only need to look to China. Better growth prospects have put upward pressure on bond yields, which are back to where they were at the start of the year. The 3% yield available on a Chinese 10-year bond certainly compares favourably to the sub-1% in the U.S. or Australia. There is little threat from a rising cash rate. Chinese officials are focused on maintaining economic momentum while mitigating imbalances in the economy or financial markets. This means that policy settings are likely to remain finely balanced and relatively stable. In a global market where there is ample liquidity and low rates are the default, the Chinese bond market offers income hunters a rare reprieve.
China is the new income market
10y U.S. govt bond yield and 1-year lending rate
JPMorgan Global Research Enhanced Index Equity Fund
To achieve a long-term return in excess of the benchmark by investing primarily in a portfolio of companies, globally; the risk characteristics of the portfolio of securities held by the Sub-Fund will resemble the risk characteristics of the portfolio of securities held in the benchmark.