Japan Stimulus

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  • December 9, 2019

The Japanese government announced last week that it was launching a $121bn fiscal stimulus package. The package is targeted at repairing typhoon damage, upgrading infrastructure and to invest in new technologies. The amount is equivalent to 2.4% of Japanese GDP and will significantly widen the government deficit. Nevertheless, the package is in line with governments around the world committing to raise spending and invest in crumbling infrastructure. The hope is that this spending will increase domestic demand, improve productivity and boost private consumption. With the current weakness of the global economy a government spending package appears a popular move, however, with debt levels already raised, some are wary of the day of reckoning when this must be repaid or inflated away.

US Trade Disputes

Global markets were shaken last week when Donald Trump appeared to ramp up his war on the US trade deficit. A series of tweets and announcements indicated that his position on evening up the trade balance has not been tempered. Comments suggesting that he was willing to wait until after the election to secure a trade deal with China, increasing tariffs on Argentine and Brazilian steel as well as EU exports following the French “tech tax”, all pointed to increasingly aggressive action on trade. This, combined with the ongoing impeachment proceedings and the upcoming election suggest that political volatility emanating from the US is likely to continue for the foreseeable future. As ever, there is the possibility of both positive and negative surprises from the US trade policy.

Saudi Aramco IPO

The long-awaited listing of the Saudi Arabian state owned oil company, Saudi Aramco, was completed last week. The sale of only 1.5% of the company raised $25.6bn, valuing it at $1.7tn. This was at the higher end of the price range guided. However, most of the funds raised were from locals, many of whom were allegedly coerced into backing the listing following the corruption crackdown. With little overseas interest and a sole listing in Saudi Arabia, the share may fail to achieve true price discovery. Nevertheless, the listing allows the worlds most profitable company to have an ongoing valuation, likely leading to a further sale of equity in the future. The oil rich state is attempting to transition its economy away from fossil fuels and is intending to use proceeds from the share sale to fund this.

Market Data

  % 1w* % 1m*
UK -1.45% -1.27%
US -1.12% -0.59%
Europe ex UK -1.06% -1.96%
Japan 0.14% -1.57%
Emerging Markets -0.44% -3.79%
Oil 5.09% 2.08%
Gold -1.79% -2.58%
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Posted By Will Dickson

Chief Investment Officer Will Dickson is a Chartered Wealth Manager as part of the Chartered Institute of Securities and Investment (CISI) qualification scheme. This recognition was obtained following an MSc in Finance and Investment from the University of Exeter, and an Accounting and Finance BSc from the University of Bath. Will’s exceptional talent is recognised by CityWire’s Wealth Manager, having been named as one of the UK’s Top 30 investment managers under the age of thirty for the last three years. Will manages and oversees P1’s range of investment portfolios. Working with the Investment Team, Will shapes the investment policy and fund selection for our Passive, Hybrid and Ethical and Sustainable portfolios. In conjunction with managing the fund portfolios, he oversees and our AIM Inheritance Tax and Tier 1 Investment Visa equity portfolios. Will has joint written articles with P1’s Head of Research, Dr Rayer. Their article “Hypothesis: Risk, like Mass and Energy, can neither be created nor destroyed” featured in the CISI’s The Review of Financial Markets. In addition to contributing to articles with Dr Rayer, Will often delivers P1 CISI Endorsed lectures to Independent Financial Advisers. You can see Will’s take on weekly investment news here.