Talking Points This Week: Complexity, Cues And Caution


All market experts and quant indicators who have recommended caution since the October rally started have had an egg on their face. Partly due to the inherent strength in the Indian markets and partly due to the CPI data led uptick in global markets, there is a short-term case of the optimism continuing. But are there enough reasons for caution? One could argue yes.

The valuations of India are among the highest, if not the highest, in the EM landscape. Sunil Tirumalai of UBS, on the sidelines of the UBS India Conference, spoke about how potentially rising deposit rates can hit savings which have hitherto been coming into Indian markets from the retail investors. There is also a case of how higher crude prices (should China re-open) can impact the CAD and the currency, and thereby have an impact on the Indian markets. For now, staying bullish has helped. But the arguments are strong, and worth pondering over.

Changpeng “CZ” Zhao walked away from his bailout for Sam Bankman-Fried’s almost as quickly as he offered a rescue. As a story in Bloomberg read, it became evident in a matter of hours that rescuing FTX would be a tall order for Binance. Its executives found themselves staring into a financial black hole—a gap between liabilities and assets at FTX that’s probably in the billions. Cryptocurrency prices plunged for a second-straight day after crypto exchange Binance said it was pulling out of a deal to purchase failing rival FTX Trading. Ether, the coin linked to the ethereum blockchain and the second largest cryptocurrency, also tumbled by more than 10% on Thursday to below $1,200. While there was a small uptick post the risk-on mood after the US CPI data, bitcoin remains more than 60% off its all-time high, hit exactly one year ago. In terms of the fallout, the FTX debacle impacts investor confidence in the short to medium term. The scale of losses is yet to be estimated, but rumors are that FTX has a large hole. The cascading effects of this development would be known only over a period of time. However, this side of the investing world remains unpredictable, and events next week would be closely followed.

All in all, a very interesting week has gone by, and would have implications for what follows in the week ahead. After another U.S. inflation surprise, CPI data will be dominating the agenda in most other markets in the coming week, shifting the focus away somewhat from the greenback. The pound will likely attract the most attention as it will be a busy week for the U.K., as apart from the economic releases, the budget statement will be watched amid lingering worries about high borrowing. Growth indicators will be important in China and Japan, while in the U.S., the main highlight will be the retail sales numbers. And in India’s case, eyes on the closure of the earnings season and the global sentiment.

Niraj Shah is Executive Editor at BQ Prime.


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