In last month’s Equity Monthly
our main message was: ”Our view is still that investors should still play equity markets defensively. Many signs indicate that the business cycle is turning, but this may take several months. Be patient.”.
Since then more evidence has shown that the business cycle has maybe already turned in Asia and this will likely spread globally within the next few months. China’s PMI figures from March suggest that China is seeing positive momentum after slowing down for more than a year. We have covered this development extensively on our morning calls
and China’s improving numbers are the key driver of equity markets right now. South Korea has turned higher
In March we got confirmation that South Korea’s leading indicators already turned higher in December and have continued to expand in January. OECD releases February figures on 8 April and we expect further confirmation that South Korea has turned in terms of the business cycle, demonstrating that Chinese stimulus has indeed proved to be enough once again to lift growth in Asia. As the months pass the effects will trickle into Europe and North America. This is likely also why the market was quite relaxed this morning when Germany Factory Orders in February hit -8.4% which is the worst growth since 2009 and at the 7th percentile of observations since 1992.