Article by Reshma Kapadia of Barrons.com
China is the 800-pound panda in any conversation about what is going on in the world today. The nation dominates the headlines, is the most-cited reason for sleeplessness among corporate executives, and puzzles investors daily. China looms particularly large for investors in the emerging markets: It represents an uncomfortably outsize stake in most portfolios. And fund managers are getting nervous.
The challenges are daunting. China is growing at its slowest pace in decades — a slowdown that began before the trade war. In past downturns, Beijing printed massive amounts of money to stimulate the economy, but that has resulted in high government debt that prevents it from taking similar measures now. China has also been bracing for a protracted struggle in the conflict with the U.S. over not just trade, but also technology and geopolitical leadership. To complicate the situation, mass pro-democracy protests in Hong Kong that began in June are still going strong, presenting the biggest threat to Beijing’s power in decades.
Not surprisingly, stock investors are reassessing their China stakes and have pulled $13 billion out of equities this year, according to EPFR Global. Meanwhile, the MSCI Emerging Markets index is increasingly a China play: Nearly a third of its weighting is in China, up from 19% just five years ago. Continue reading Emerging Market Funds Try to Sidestep China
The market pared losses in early afternoon trade. The S&P BSE Sensex was down 167.88 points at 40,973.97. The Nifty 50 index was down 64.65 points at 12,033.70. The market breadth was ruled by sellers. On the BSE, 916 shares rose and 1305 shares fell. In Nifty 50 index, 12 stocks advanced while 38 stocks declined. Cipla rose 0.52%. Dr Reddy’s shed 0.61%. HAL was up 0.45%. Lakshmi Vilas Bank hit the 10% upper circuit at Rs 18.15. Maruti Suzuki India declined 0.9%. Ashoka Buildcon declined 1.01% to Rs 112.65.
China’s central bank will provide the first batch of special re-lending funds for combating the coronavirus on Monday and will offer the facility weekly to banks later this month. The move comes as the virus outbreak continues to hammer retail spending and industrial production and as economists continue to downgrade their growth forecasts as a result. The growth shock has prompted the Peoples Bank of China (PBOC) to prioritize growth over debt control by pledging a series of emergency measures to inject cash into the financial system and wider economy. Under the funding facility, 9 major national banks and some local banks in 10 provinces and cities are qualified for the special funding, according to PBOC Deputy Governor Liu Guoqiang. Those financial institutions should speed up the review process for loan applications and release loans within 2 days, Mr Liu said in a speech posted on the PBOC website. The central bank had earlier said it would ensure funds are directed to production and business activities related to combating the coronavirus. Financial institutions must offer loans from special re-lending funds at up to 100 basis points below the one-year Loan Prime Rate, it said. The depth of the downturn will depend on how quickly the virus is contained and by extension how quickly restrictions on travel and factory production will be lifted.
S&P500 vs Caterpillar (CAT) Stock Performance from 01Apr2014 to 22Nov2019
Caterpillar (CAT) is a global corporation, and its stock has been facing the full impact of the uncertainty and slowdown created by US-China trade war. The stock is currently breaking out from a double bottom pattern and moving up for target $165-170 level, from the current price of $143 per share. The early buy signals came at $120 level.
Stock Trading Strategy: The right time to buy Caterpillar (CAT) stock is when the market is badly down along with this stock price beaten down for global recession fears. Mining industry has been down for many years, so Caterpillar may get some positive growth from the recovery in global mining industry. Caterpillar is truly a long term investor’s stock, and it has created big gains for investors buying the stock on deep corrections.