Rashid A Mughal
GLOBAL economy in 2019 might just be the best year investors have ever had. The numbers are staggering. Global stocks have piled on more than $10 trillion, bonds have been on fire, oil has surged almost 25 per cent, former crisis spots Greece and Ukraine have top performed, and even gold has sparkled. Wall Street and other 50 country world index have both stormed to record highs after 30pc and 24pc leaps. Europe, Japan, China and Brazil are all up at least 20pc in dollar terms too. Remarkable and promising! This was quite in contrast to 2018 when almost everything fell. But there have been a couple of important drivers. One was China’s commitment. It was serious about stimulus for its $14 trillion economy. The other was the screeching change of direction by the world’s top central banks led by the Federal Reserve which cut US interest rates for the first time since the financial crisis more than a decade earlier. The last cut was in end of December 2019 which sent the New York and other stock markets skyrocketing.
“Whereas a year ago the Fed was reigning rates and earnings were rolling over, this year you have felt the Fed has been on your side”, said James Cluny who manages asset firm “Jupiter’s Absolute Return Fund”. “They are willing to do QE-4 at a stock market (record) high, which is extra ordinary” he added, referring to Fed efforts to bring down a spike in money market rates that some suggest could presage a fourth round of quantitative easing asset purchase. That Fed shift and the worldwide blizzards of rate cuts that have come since have fired bond markets up like a rocket. US Treasuries, the world’s benchmark government IOU have made a whopping 9.4pc after yields. That followed a near 40 basis point fall the last quarter of 2018, after five quarters in which they had consistently risen. German Bunds-Europe’s safest asset have had their best year in five years, making roughly 5.5pc in Euro terms as the European Central Bank has reversed course too. The yield on 10 year debt had dropped below zero per cent for the first time since 2016 in March and dived as deep as 0.74pc in September. In commodities, oil has raced up almost 25pc following its best first quarter since 2009. That, plus key dividend rule changes has also made Russia’s stock market the best in the world with a 40pc rise and also made the Ruble as one of the top three currencies.
Statistics likely to make most jaws drop is that Greek banks-remember all that Euro debt crisis and capital controls stuff a few years back?- have been some of the world’s best performing stocks this year. The country’s biggest lender Piraeus Bank is up 250pc as is smaller Attica Bank, helping make Athens Europe’s strongest bourse this year. Tech has remained on top more broadly. Apple may just have lost its crown to world’s most valuable firm, Saudi Aramco, but it can console itself with its 77pc leap this year. Facebook has surged 57pc, Microsoft 53pc Google 30pc, Netflix 24pc and Amazon 19pc. China’s tech sector is right in mix too with a 64pc rally and online Alibaba up 53pc.
Despite almost daily Brexit chaos, the loss of two prime ministers and a general election, UK gilts have returned 4.5pc and a near 6pc rise could land sterling its best quarter since 2009. As usual the big swings have been in emerging markets. Argentina’s Peso and Turkey’s Lira, 2018’s punch bags have taken another beating. Argentina’s woes have worsened such that it is restructuring its debt again while Turkey’s worries have not really gone away. At the other end of the spectrum a new president and a new reform agenda have seen Ukraine’s Hryvnia rocket 19pc. Russia’s Ruble is up 11pc and Egypt’s Pound is sandwiched in between with an 11.7pc gain. As stability became the key word at China’s annual Central Economic Work Conference, head of the UK Investment Office at UBS Wealth Management noted that the realization of China’s objectives for 2020 can help reduce uncertainty for the world economy.
I am struck by the breadth and scope of China’s engagement with the world. There is now no matter of global importance in which China does not participate, said Robert Lawrence Kuhn Chairman of the Kuhn Foundation. China has been a major growth engine for the world economy and its economics health bears global significance, said International Monetary Fund (IMF) Managing Director Kristalina Georgieva. There is a clear commitment of the Chinese government to continue its “integration with global economy”, said Director General of the World Trade Organization (WTO) Roberto Azevedo. “Connecting more to others, importing more, exporting more, all those connectives are fundamental if we are looking at the long term sustainable process of development. I think the role and performance of Chinese economy reflects China’s global importance precisely as a precursor of international trade”, said Jose Luis de la Cruz, Director of Mexico’s Institute of Industrial Development and Economic Growth.
In recent years especially the past decade, China has been open to trade with the entire world and that benefits not only China’s development, but also the world’s. Secretary General of the United Nations Conference on Trade and Development (UNCTAD) said, “At a time when we are seeing major players “look inward” or look for protectionism, which excludes others, China advocates that we embrace international solidarity, we open up opportunity in our economies for greater and deeper engagement. Maintaining steady and consistent exports plays a vital role in boosting economic growth for all member states, especially for the poor countries. If China keeps its market wide open to all, it will dramatically help boost related countries economic growth, “said Former Vice Chairman of the United Nations (UN) Business Council, John W. Allen. The trade war between the US and China which held the global economy hostage for almost two years finally signalled an end on the 15 January 2020 when both sign phase one of the agreement for trade regulation. The decision will not only benefit both countries but also benefit other countries whose economies are dependent on these two economic juggernauts.
— The writer is former DG (Emigration) and consultant ILO, IOM.