The Fed will continue with quantitative easing measures as long as the U.S. economy is underperforming, says Mark Konyn of CCAM.
02/21/2013 | 03:35am US/Eastern
SHOWS: HONG KONG, CHINA (February 21, 2013) (REUTERS - ACCESS ALL)
MARK KONYN, CEO, CCAM
1. REPORTER OFF CAMERA SAYING:
'The Fed minutes overnight suggested that the central bank may have to stop or slow its current quantitative easing measures before hiring picks up. What impact will this have on global money flows, as Japan is doing the opposite, keeping monetary policy loose?'
2. MARK KONYN SAYING:
'Well, a number of points there. I think firstly the publication of those minutes from the Fed meeting suggests that you don't have consensus around the continuation of the latest stage of quantitative easing in the U.S. And that has caused the market immediately to sell off in the U.S. And that will have implications globally as we work through the ramifications of that. Whether or not those minutes are truly reflective of a change of resolve around policy remains to be seen. And I would suggest that the previous statements by Mr. Bernanke stand firm. And they will continue to with their purchase scheme for as long as the economy is underperforming in terms of jobs. In terms of what's going on elsewhere, I would argue against the assumption or the conclusion that Japan is easing. I think what we've seen is significant adjustment to the valuation of the yen. And that's largely as a result of Abe coming out and convincing the market of an inflation target, of a growth preference, and pressure on the central bank to ease. But what it's resulted in is a transfer of JGBs, of government bonds, which has reflected negatively on the yen itself. And that's been on rather a small level of ownership, if you like, by foreigners in the JGB market. So there is the propensity for that to reverse, although I would suggest that will not occur. But I don't think yet we've seen aggregate monetary growth in Japan increase significantly. So this is not really a process of quantitative easing that we're seeing in Japan at the moment. We're seeing an undermining of the valuation of the yen as a result of the leadership announcements and pressure to try and get the yen down.'
3. REPORTER OFF CAMERA SAYING:
'How should investors position in China ahead of the NPC policy meetings in March? Are you expecting any sectors rotations?'
4. MARK KONYN SAYING:
'Well, certainly the easy odds have been made already, as the authorities have put in a number of measures last year to try and encourage investors back to the Chinese stock markets - with great success, as you know, particularly through the course of September last year and the fourth quarter. So the easy odds have been made. What is going to drive the market much more now is going to be fundamentals. It's going to be more difficult. And we would agree that a trading approach taking account of short-term fluctuations and sentiment will add incremental value. And as we saw, as there was concern about banks, as we came out of January, certainly as a firm we were starting to switch some of our positions away from some of the banks. And that - on a relative basis - added values to portfolios. So there will be opportunities like that as we work our way through 2013. But underlying all of the positioning is the view that the structure of the economy now is much more positive. That we are going to see the NPC meeting come out with measures to continue to reform the economy. It's going to result in the near-term in certain projects, which are going to benefit certain sectors within the economy. And that's certainly how we are overall positioned in China at the moment.'