As we hit the end of June and Q2, we have some important market observations in the world of international investing. Below are some key points for the week ahead:
- The National People’s Congress of China officially passed the Hong Kong national security bill, thereby stripping the Hong Kong people of their freedom of speech and completely reneging on the deal China signed with Britain three decades ago. There is concern in Hong Kong that this new law might even be retroactive in nature so that China can go after those they feel were the principals in organizing the protesting that occurred over the last year.
- As the world awakens to the human rights aggrievances that are too often committed by the Chinese Communist Party (CCP), some countries are beginning to speak out. The U.S. Senate, for its part, passed a bi-partisan bill last week that puts sanctions on certain Chinese banks, individuals, companies and other organizations that prove to have enabled the new law. This followed bills aimed at de-listing Chinese ADR’s from U.S. exchanges and sanctions that were passed earlier in the month that target China’s human rights violations against its Muslim minority groups. China hit back with visa restrictions on U.S. lawmakers and threats to pull out of last year’s trade deal. While these tit-for-tat announcements have largely been ignored by the markets thus far, we believe the unraveling of US-China relations will lead to disruptions in trade and, ultimately, the equity markets and stock selection around this issue remains one of our key concerns.
- Despite the huge amount of job losses around the world, millions of jobs have been saved through various government intervention programs. However, many of those programs are set to expire in the coming months in Europe and the U.S. and the next set of questions the markets will be focused on are; what will the next round of job saving stimulus programs look like, will they be as wide-spread or more focused, and how big will the fallout be if the economy is not able to absorb the slack in the job market? Although, the markets have been focused on the response from governments around the world for their near universal “whatever it takes” stimulus response, there is much work to be done. As governments become more and more leveraged, the ongoing response may become more focused but less effective. We continue to monitor the employment picture around the world and how that might affect our portfolio decisions.
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