Perspectives Blog

Interest rates in a highly indebted economy

Zach Pandl, Portfolio Manager and Strategist | October 13, 2014

…has a kind of “deleveraging constraint”—that interest rates are capped at low levels because the overly indebted private sector cannot bear higher borrowing costs. In this world, even 10-year Treasuries yielding 2.3% could be attractive because they still command a premium to cash rates pinned permanently near zero. There are a few ways in which the deleveraging constraint might work. The first is through the impact of rising rates on the private

How bad is China’s credit crisis?

Weili Jasmine Huang, Senior Portfolio Manager | February 3, 2014

…il 2013 San Francisco Fed paper “Shadow banking in China: Expanding Scale, Evolving Structure”) • China’s trusts sector consists of 60 or so trust companies, which are largely owned by agencies of the states. That means the government still has a tight grip of the sector. • Total trust assets are estimated to be Rmb (US$10 trillion), only about 7% of total banking sector assets. Another shadow banking product is wealth management products issued…

ECB asset purchases — Bazooka or damp squib?

Martin Harvey, Fund Manager, Threadneedle International Ltd | September 22, 2014

…wever, inflation expectations have since returned to the levels that inspired the governing council to commit to private sector asset purchases at its September meeting. Is the market telling us that policy is impotent against the gathering deflationary forces? Inflation expectations The measure of inflation expectations cited by Mario Draghi as justification for policy easing, the 5-year 5-year forward inflation breakeven (Exhibit 1), has remain…

Investing selectively in Asia

Soo Nam Ng, Head of Asian Equities | July 14, 2014

…they wait. China’s anti-corruption drive in the last few years is another shifting cloud. Its oil and gas sector is emerging from the anti-corruption purge of Zhou YongKang, China’s ex security czar who has had his power base within it. Recent positive developments include Petrochina’s plans to invite private capital to take stakes in its oil pipelines. After a corruption clean-up, investor interest In the railway sector may al…

Biotech’s beneficiaries: How outsourcing is improving the sector and spreading the wealth

Aaron Reames, Senior Equity Analyst | February 24, 2014

…quarters. Outsourcing offers biotech firms varied advantages, from cost reduction to enhancing credibility. The sector’s success and the outsourcing trend is fueling ancillary businesses, notably specialty REITs, CROs and research tools companies. As biotech indices continue to surpass all-time highs, one must contemplate if there is additional room to run. We continue to believe the sector will outperform the broader markets for at least a few…

Oil and the high yield market

Columbia Management, Investment Team | December 8, 2014

…Portfolio Manager and Head of High Yield and Mark Van Holland, CFA, Senior Portfolio Manager  Size of the Energy Sector Because the energy sector is a large component of the U.S. high yield market relative to some other asset classes, the market has received increased scrutiny due to recent declines in oil prices. Prior to the recent sell off, energy accounted for more than 15% of the high yield market, making it by far the largest industry (heal…