January - March 2018

What 2017 means for 1^st QTR 2018

What’s on the Horizon for GBB Equity Buyers?

What 2017 means for 1^st QTR 2018

Investors should enter 2018 with optimism. The global economy is not in bad shape and momentum will be key for the rest of the year.  2017 saw stocks shake off weakness late in the year and we saw the result in the first week of trading this month.  In the US the consumer looks to be in good health, we saw wages increase in 2017 at the best pace we have seen since 2009. Although there was a slight slowdown late in the year, signs point to a pick-up during this 1^st quarter, something we keep a close eye on as job growth is a key indicator of sentiment within the markets, but we see steady growth and positives.

The end of a corporate earnings recession also boosted sentiment. Fourth-quarter earnings reports confirmed that earnings for the S&P 500 as a whole had grown modestly on a year-over-year basis for the second quarter in a row, bringing an end to a five-quarter slump that began in early 2015. As oil prices stabilized near USD $50 per barrel, investors should begin to look forward to better results from the energy sector, which had been the biggest overall drag on corporate profits.

Trump and Growth?...

I think the Trump administrations proposed regulatory reform and economic stimulus will have an influence over the markets.

If policy optimism catches on, it will give a positive sway on the quarter.  Small Business attitudes should remain at all-time highs and we should keep an eye on the National Federation of Independent Business’s gauge at the end of the quarter, along with the Conference Board’s consumer confidence index as we are fast approaching the best level since December 2000. It remains to be seen if this will actually translate to higher growth remains the big question, however, if business investment and consumer spending expand at a moderate pace then we have a healthy marketplace.

My only doubt about the US ahead in this quarter is the proposed health care reform bill and getting it through the House of Representatives, we could see a bump in the road if the bill is not passed and maybe questions will be asked about President Trump’s broader reform agenda if this does hit a roadblock, and whether proposed tax cuts may suffer or have to be downscaled, we shall watch this closely.

Rate Increases...

We have a feeling that the Federal Reserve will raise interest rates 3 times this year. We feel investors will be more focused on fiscal measures that will leave monetary policy to not yield too much influence on the markets in the 1^st quarter. If the rate increases are at a moderate pace, we feel stocks will weather the storm with little damage.

What’s on the Horizon for GBB Equity Buyers?

As many of you already know, my sentiments for this year are mainly Asian based. We will be acquiring positions trading on the Hang Seng in Hong Kong of Chinese based companies in H-Shares.

The paradox of Chinese shares

The shares of Chinese companies are, at the same time, called some of the ‘Best’ and some of the ‘Worst’ market investments out there.

Let me explain, these companies have issued shares both inside and outside China, but by far the preferred investment for international investors are H-Shares trading on the Hang Seng.

H-shares are doing especially well because Chinese investors are sending their money out of China. One of the ways to do this is by buying equities through the Shanghai-Hong Kong Stock Connect.

Few want A-shares, shares of Chinese companies traded on China’s exchanges. In 2017, the widely followed Shanghai Composite Index fell 14.3%. The Shenzhen Composite was off 13.0%, and the ChiNext down 20.5%. These were among the year’s worst performing global indexes.

H-shares, sold in Hong Kong and measured by the Hang Seng China Enterprises Index, was up only 1.4% at the end of the trading year, however, these stocks have had, in effect, two separate years. The first, January through February 12, was a disaster, with the index down 22.3% during that period. After that, the H-share index surged 30.5% at years end.

The H-share index has had a good run during months of accelerated capital outflow, much of it occurring from July 2017 onward.

This is where our current situation falls into place, we have over the course of this year and beyond into 2^nd quarter 2018 unique opportunities to have access to Hang Seng trading equity, this is due to various statute of limitations coming to their conclusions from Asian banks that hold held equity in a company with dual listings on both exchanges. This equity was paid to the banks in return for loans taken out by the company in the 2000’s. Due to our networking abilities and contacts within the industry we will have access to positions that will not only be attractive to our existing preferred buyers, but we will be entering into a global marketing campaign to attract new buyers into Global Business Brokers and show them a new way of working, with our saying, less paperwork, less hassle and more profit.

Our existing preferred clients will be notified of upcoming positions and as always we look to contact us when looking to sell any position(s). For all prospective clients, click on ‘Monthly Newsletter Subscription’ in our Equity section to receive monthly updates.

_________

Dr. Timothy Windsor