Central Banks & equity markets

Templeton has come out with a quick commentary on central banks and equity markets



Their thoughts:

  • US interest rate increases haven’t always resulted in lower performance for emerging markets generally.
  • We don’t anticipate that a mild increase in US interest rates would have a significant impact on the financial markets, particularly when many other central banks around the world remain in easing mode
  • One worry is that as a result of the BOJ’s purchase program, the free float of companies will dry up and it will become hard for investors to trade in stocks. The falling liquidity could then result in more volatility.

My random ones:

  • So in both charts there are low correlations between interest rates and equity market, but apple to apple comparisons are difficult with economies/currencies in various stages of developments and SE Asia basically recovering from post ’97 crashes. Going forward it will be different questions that are being asked, the debt issues are now from the West + Japan & China, the confidence is politics is different, and perhaps the impact of technology will result in different industries in different growth areas. In the end I still think that everything just looks different but I’m still $hit-scared of a USD bull market..

Source: Franklin Templeton


Land & Building tax postponed

Well then that’s disappointing. The finance minster came out saying that the building & land bill tax may not pass next year but in 2018 instead. Why? Officially the answer is to ensure that the taxation of empty should isn’t double taxed…

So impact? Great for the short term for real estate co’s as theoretically they could sell out projects faster, speculation will resume, land prices may temporarily increase (great for those massive landowners…) = higher development costs = higher selling prices…etc etc..

Random thought – A late breakfast with a friend this morning raised a question, if we know that interest rates are going to increase, why wouldn’t potential homebuyers run out and quickly buy properties, lock-in their mortgage rates (if possible, though not in Thailand) and this could lead to, say US GDP #’s looking better than expected thereby driving rates higher.

Elections delayed?

The Deputy PM came out with rather unconvincing comments elections would be held next year. Positive or negative? My initial reaction was an expletive but when thinking about the timeline of the King’s funeral (1 year at least) and looking at the past when the King’s mother passed and other passings. Each funeral event was at least a year after their respective deaths and typically held in November/December. So perhaps the delay will arguably be out of respect for the King’s funeral event and held in 1Q18 or 2Q18.

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