Overseas Investment Exits Hit a Record High

This month, foreign portfolio investors have sold Indian stocks and bonds the most in two years after a declining rupee made US assets more attractive, and rising global interest rates rendered the carry trade unviable.

Total bond and stock net sales by overseas funds touched a high of Rs 31,984 crore so far this month, show data from National Securities Depository.

Exits may quicken towards the year-end as funds compute performance bonuses for the year, dealers said. They sold a net of Rs 19,810 crore in equities, the largest monthly quantum this year. Debt sales amounted to Rs 12,167 crore.

“There is a flight to safety amid the improving US economy and rising global rates,” said Ashutosh Khajuria, CFO, Federal Bank. “Pressure has been mounting on the emerging markets. If India demonstrates better performance on macroeconomic indicators like iinflation, current account and fiscal deficit, those investors would come back again.”

This year, overseas investors have net sold Rs 93,481 crore of financial assets in India, the highest ever sale at least since 2002, data showed.

US unemployment, a key economic metric for the world’s biggest economy, fell to levels last seen about five decades ago, signaling a strong labour market and rising wages. That would mean the US policymakers would continue to raise headline lending rates.

“Rising US yields along with improving global economies have triggered investment exits from emerging markets,” said Sanjiv Bhasin, Executive VP-Markets, IIFL Securities. Softer oil prices and a stable rupee should reverse the market trend, he said.

“The debt market is going through uncertainties in the non-banking sector. Once it is settled, investors should regain confidence,” Bhasin said.

Two weeks ago, the US benchmark yield climbed to 3.23%, its highest level since May 2011. High US yields are prompting dollar funds to return to US assets that carry no currency risks.

Emerging market currencies have turned volatile, risking global investors’ investment returns on respective currencies. The rupee hit a record low of 74.48 per dollar and is one of the worst performing emerging market currencies.

The central bank did not raise the benchmark rate in its October bi-monthly monetary policy.

According to Marc Faber, a global market guru, tight monetary policies are good for the rupee, but not so good for the stock market.

- Source, Economic Times India

The Signs are Gathering for a Wall Street Crash

It is different walking into the office. As it was in February. “How many points was Wall Street down,” a colleague says as he walks in this week. That morning the Dow Jones was down 127. The assumption that markets will fall instead of rise is a rare state of mind in the broking world, it only happens in a bear market. Of course nobody knows if a bear market has started, but the fact we are discussing it is a sign. The 7.8 per cent fall in the market is another.

Those that declare a bear market are reckless to do so, their hollow predictions no matter how confident and no matter how eloquently expressed, are little more than attention-grabbing guesswork, and somewhat irresponsible. But financial market commentators know that "calling the crash", no matter how unfounded, attracts attention. It gets hits to run against the herd and invoke fear, it gets hits to suggest everything is going to hell, so someone will always want to do it.

Despite that, an independent, agenda-less viewpoint, delivered without fear, is always interesting and of value, even when wrong. This is how commentators like Marc Faber and Nouriel Roubini have survived for so long despite being so repetitively wrong, because they are independent, free speakers and, of course, just occasionally, when the market tips over, they can claim the high ground and shout “I told you so”. Someone has to sit at the bearish end of the market’s bell curve of opinion and someone has to provide the devil’s viewpoint. It is a good space to occupy because there are not a lot of people there, so you stand out more easily.

But you can’t sit there if you’re trying to sell a financial product in the finance industry. Boom sells, not gloom and doom, meaning that financial market negativity is for people selling subscriptions not financial products. Which is why the bears are in the minority, because it serves nobody’s commercial purpose unless you are selling a newsletter that gorges on fear.

But this week, one of the major brokers, an institution permanently prone to optimism for commercial purposes, crossed the line. The mainstream getting bearish is another sign, when the institutions that are commercially biased to promote greed, move towards fear.

This week, Morgan Stanley’s chief US equity strategist wrote that the market is in the midst of a “rolling bear market” across all global risk assets caused by the drain in liquidity (the end of quantitative easing) and peaking growth (ending of the Trump tax sugar hit for corporate earnings). He says “with growth, tech and discretionary stocks, having now begun to underperform, the S&P 500, the final holdout of the ‘rolling bear market’, will eventually succumb, and probably soon”. The implication is that “the rebound last week was nothing but a dead cat bounce and the correction is not done yet”.

In times of flux, when volatility is high and everybody fears what will happen next, the herd can obsess over the irrelevant. It is doing so at the moment. The focus is on the S&P500, which has dropped below the 200-day moving average (again). Morgan Stanley says, “we look for confirmation [of a bear market] with a definitive break of the S&P 500 through its 200-day moving average”. Below the 200-day moving average is another sign.

Another bear market indicator is something called the Hindenburg Omen. It is a technical indicator that compares the number of 52-week highs to the number of 52-week lows on the New York Stock Exchange and purports to predict the likelihood of a market crash. It was named after Germany’s Hindenburg airship, which crashed in 1937. The Hindenberg Omen Indicator was developed by a chap called Jim Miekka, a blind mathematician, based on a series of criteria. All the criteria for a Hindenburg Omen were met on September 11 this year by the New York Stock Exchange.

Does it matter? Not really. The Hindenburg Omen is not a great indicator, it has a record of false alarms, but more interestingly perhaps is the fact it always triggers before any major market sell-off as it did in 1987 and 2008. Not every Hindenburg Omen signals a market top, but every market top sees the Hindenburg Omen triggered. It is another sign.

The signs, they are gathering.

- Source, ET Markets

India Rupee Crisis Will Get Much Worse, Before it Gets Better

The Indian currency breached the 74-mark for the first time ever against the US dollar this month, but the worst could still be yet to come for the rupee.

Financial analysts are now wondering how low the rupee will continue to sink, as investors recoil over a significant amount of their gains in India being wiped out.

He claimed the rupee could record levels of up to 80 against the US dollar within just as little as six months.

Speaking to finance website MoneyControl, he said: “My own sense is that in the next 6 months, the rupee should stabilise between 72-74.

“However, in between, a spike towards 79-80 may happen.”

The Reserve Bank of India went against predictions from financial analysts as it held interest rates at the start of October.

The RBI's monetary policy committee (MPC) left the repo rate unchanged at 6.50 percent, with five out of six panel members voting to hold the rate

In its policy statement, the bank said: “Global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook.”

Defending the decision, the bank said it was acting "to further strengthen domestic macroeconomic fundamentals”.

Marc Faber, veteran investor and publisher of the Gloom Boom & Doom Report newsletter, called on India to raise interest rates “meaningfully” to give the rupee some breathing space.

He said: “Either India has to increase interest rates meaningfully, which would mean that the economy would be hurt, or they obviously will have a weaker currency over time – and nobody can deny the fact that over the last 10, 20, 30 years, the rupee has been a weak currency.”

Earlier this week saw the Prime Minister of India issue a desperate call to oil producers to review payment terms to help ease concerns of soaring oil prices.

Oil prices have reached four-year peaks as the market focused on upcoming US sanctions on Iran while shrugging off the year's largest weekly build in US crude stockpiles.

India currently imports more than 80 percent of its oil needs.

- Source, Express

Marc Faber: Be Very Careful, Markets Are Incredibly Fragile Right Now

Marc Faber, editor and publisher of 'The Gloom, Boom & Doom Report', who in an interview to ET Now earlier this year had projected a 20 per cent drop in Sensex to a sub-30,000 level, now says the rupee could hit 100 a dollar mark in the next few years. 

India’s fiscal position is not particularly good. Either India has to increase interest rate meaningfully or has to let rupee depreciate over time.

- Source, ET NOW

Real Returns Are a Myth, the Markets Are Rigged

Many international investors consider “real returns” a key gauge for emerging market investments. 

Although there are multiple metrics to determine real returns, one popular mode is the difference between one-year government Treasury Bills and one-year projected retail inflation.

“With no further rate increase, the lure of India's real return may have diminished, especially when US Treasury is rising,” said Anindya Banerjee at Kotak Securities. “It would impact investor sentiment when the world is in a risk-off mode.”

The central bank did not raise the benchmark rate in its October bi-monthly monetary policy.

According to Marc Faber, a global market guru, tight monetary policies are good for the rupee, but not so good for the stock market.

- Source, Economic Times, Read More Here

Overseas Investment Exits Hit a Record High

This month, foreign portfolio investors have sold Indian stocks and bonds the most in two years after a declining rupee made US assets more attractive, and rising global interest rates rendered the carry trade unviable.

Total bond and stock net sales by overseas funds touched a high of Rs 31,984 crore so far this month, show data from National Securities Depository.

“There is a flight to safety amid the improving US economy and rising global rates,” said Ashutosh Khajuria, CFO, Federal Bank. “Pressure has been mounting on the emerging markets. If India demonstrates better performance on macroeconomic indicators like inflation, current account and fiscal deficit, those investors would come back again.”

This year, overseas investors have net sold Rs 93,481 crore of financial assets in India, the highest ever sale at least since 2002, data showed.

US unemployment, a key economic metric for the world’s biggest economy, fell to levels last seen about five decades ago, signaling a strong labour market and rising wages. That would mean the US policymakers would continue to raise headline lending rates.

“Rising US yields along with improving global economies have triggered investment exits from emerging markets,” said Sanjiv Bhasin, Executive VP-Markets, IIFL Securities. Softer oil prices and a stable rupee should reverse the market trend, he said.

“The debt market is going through uncertainties in the non-banking sector. Once it is settled, investors should regain confidence,” Bhasin said.

Two weeks ago, the US benchmark yield climbed to 3.23%, its highest level since May 2011. High US yields are prompting dollar funds to return to US assets that carry no currency risks...

- Source, Economic Times, Read More Here

Diversify Your Assets And Jurisdictions To Survive The Next Financial Crisis

Dr. Marc Faber, editor of the Gloom, Boom & Doom Report, spoke on SBTV about the state of the global financial system. Despite the trade wars initiated by the Trump Administration, the U.S will be unable to compete with Asia to reverse its trade deficit. Dr. Faber believes that the US cannot be competitive even if there is free trade.

Compared to the 70s, the stock market now is a significant part of the US economy. A stock market crash will have a huge impact on the economy today, probably enough to trigger a depression. In general, many assets are expensive today due to monetary inflation.

The Bank of Japan is now a major shareholder in nearly 40% of listed companies in Japan as the central bank keeps buying stocks under its ultra-loose monetary policy. If such central bank interventions become pervasive, Dr. Faber thinks it is possible for a central bank to own most of the assets in a country. This would be tantamount to achieving silent socialism.

- Source, SBTV