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Cayman Funds 2016

CONFERENCE ROUND-UP CAYMAN FUNDS | 2016 67 Shutterstock / corlaffra Anne Richards, former chief information offi cer (CIO) at Aberdeen Asset Management, said there seems to be a disconnect with the actual situation on the ground in emerging Asia, where despite times seeming as tough as ever, companies are not experiencing the same level of pain as they did in the Asian crisis. “Net debt to equity is half of that in the developed world and valuation multiples are lower,” she said. “Sooner or later the fundamentals will come through,” she said. Richards also noted that the International Monetary Fund is yet to change its growth forecasts for China, with 7 percent expected for this year and 6 percent for next year. “It is quite convenient and easy for policymakers to blame emerging markets for the world’s problems, but that is just lazy,” she said. Mark Hart, chairman and CIO of Corriente Advisors, added that quantitative easing (QE) in the US had prevented a correction in China, while domestic savers had previously no reason to send money abroad. “China will still have to deal with the excessive borrowing by companies from banks at uncompetitive levels,” he said. Just 11 percent of Chinese savings are held abroad, he said, with Indonesia the next lowest at 32 percent and the US in the region of 200 percent. “Now there is credit risk and currency risk, and there is real money and real savings trying to get out.” Confl ict solution Another presentation highlighting global risks was given by Pippa Malmgren, an economic adviser and author of Signals and Geopolitics for Investors. Malmgren suggested that the next round of QE, a measure deemed as needed and inevitable by some economists, could come in the form of military spending, a concept that shocked some delegates. “It is a somewhat scary proposition,” she said, but explained that given the expansionist military strategies of the likes of Russia and China in recent years it should be viewed as a realistic scenario. “Confl ict is also one way of solving debt overhangs,” Malmgren said. She also highlighted the signifi cance of China’s One Belt, One Road (OBOR) economic development strategy and framework which is designed to establish better connectivity and cooperation between countries mainly in Eurasia, while giving China a greater role in global affairs and the ability to export its production capabilities. She said the economic policy has deep and widespread implications for all Western economies because it means that China is increasingly investing in long-term infrastructure projects as opposed to buying US treasuries, something that has benefi ted the US economy for some time. “It used to be a perfect circle of capital whereby we would buy Chinese goods and they would invest in our economy but the fi nancial crisis broke that and things are changing fast now,” she said. She highlighted that, partly driven by such changes in the world, infl ation would become a very real risk for many of the world’s biggest economies and argued that government statistics on infl ation mask its true extent in the real world.


Cayman Funds 2016
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