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Overseas – Some of the best news for U.S. companies and investors has been coming from overseas.
At home, the news remains bleak. In July, for example, U.S. retail sales slipped 0.1%—not the increase many economists were expecting. Heavily indebted and stressed about job losses, Americans seem reluctant to return to their free-spending ways.
Abroad, however, good news has come from unexpected places. Economists already suspected that China and other emerging economies were showing strength in recent months, the effect of the Chinese government’s aggressive stimulus programs.
West Palm Beach (HedgeCo.net) – Hedge funds took modest advantage of March’s upswings in the global equity and credit markets, according to Morningstar’s hedge fund performance summary for the first quarter of 2009.
Equity markets around the world significantly rebounded in March as appetite for risk returned, especially in emerging markets, according to the report. Positive lending and manufacturing news in China coupled with higher commodity prices, which helped stocks in other emerging economies such as Russia, drove the Morningstar MSCI Emerging Markets and Morningstar Emerging Markets Hedge Fund Indexes to increase 4.2% and 6.2%, respectively.
"In March we saw a recovery in equity and some credit markets, which helped hedge funds post small gains. But many hedge fund managers, believing that the economy is not yet out of hot water, continued to remain cautious, and were not strongly positioned to participate in the market rally," said Nadia Papagiannis, Morningstar hedge fund analyst. The Morningstar MSCI Developed Markets Hedge Fund Index rose only 1.1% in March compared to the MSCI World Index, which climbed 7.2%.
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Reuters – Finance ministers from rich nations, when they meet on Friday, will face less economic turbulence than at their last gathering two months ago, but they recognize they need developing nations to step up spending to revive the world economy.
Acknowledging the growing economic might of developed nations, U.S. Treasury Secretary Timothy Geithner scheduled a gathering of officials from the Group of 20 wealthy and emerging economies next Friday immediately on the heels of a meeting of the rich Group of Seven.
Reuters – European Central Bank Executive Board member Juergen Stark was quoted on Tuesday as criticizing decisions made at the G20 summit to boost the IMF’s Special Drawing Rights (SDRs).
Stark suggested in a newspaper article that the decision was potentially inflationary as it would create "helicopter money" and that it had not been properly thought out.
Last week leaders from the Group of 20 wealthy and emerging economies agreed to support a general allocation of $250 billion worth of International Monetary Fund’s SDRs alongside other measures to boost the Fund’s firepower.
Forbes – Private equity investors in Asia are increasingly fearful of fraud within their portfolio companies as the global economic downturn puts mounting pressure on firms in the region.
The global financial crisis has already caused significant damage to private equity-backed companies in Asia, with shares plunging and demand drying up for everything from electronics to manufactured goods.
But corporate fraud, a scourge that can be more prevalent and harder to detect in emerging economies such as China and India, can quickly turn a bad private equity investment into a disaster.
Wall Street & Technology – Global investors boosted their equity holdings for the second month running in December and cut bonds, thanks to signs of stabilising stock markets and tumbling government bond yields, Reuters polls showed on Monday.
Surveys of 44 leading investment houses in the United States, Japan, continental Europe and Britain showed an average mixed-asset portfolio holding 56.0 percent in stocks, up from 54.8 percent in November. However, it still remained below the long-term average holding of almost 60 percent.
Bond holdings fell to 33.0 percent in December from 34.3 percent the previous month, above the long-term average of around 32 percent.
Cash rose to 5.4 percent from 5.3 percent.
A rise in the respondents’ equity holdings comes as world stocks, measured by MSCI, rose nearly 20 percent after hitting a 5-1/2 year low on November 21.
A round of central bank interest rate cuts worldwide and the introduction of fiscal stimulus packages in major developed and emerging economies have helped convince many investors that stock markets might bottom before long.
