Investment Strategy Report - AugustÂÂÂÂÂÂ 2018: Be Cautious!
Monetary policies has been changing in order to tackle rising inflationary pressures worldwide. The US, the EU and the latest, Japan, are attempting to end their QE programs. The “Free money” period seems to be over. This is not supportive for equity markets.
Moreover, as the Fed has increased rates, emerging market currencies have depreciated in part due to rising US bond yields. Interest differentials and risk aversion favor the greenback. Accordingly, large outflow of money out of emerging and frontier markets has been evident. Vietnam is no exception.
For markets with positive dynamics, capital may eventually return. However, considering the uncertainty surrounding Mr. Trump and the trade war tensions, we believe the process will take time.
Overall, we are seeing less liquidity in the market, and a certain diversion in corporate earnings results. Therefore, we think that we are in an environment where stock picking is what matters. It is not a bad idea to be conservative and cautious and retain some cash. There is no need to rush in to buy because it will probably take time for stock markets to digest the headwinds that we are now faced with.
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