ECB Rate Cut Boosts Investor Sentiment, Baring’s Khiem Do SaysKana Nishizawa
Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd., which manages about $51 billion, comments on the global economy and stocks.
Asian shares rose today after the European Central Bank lowered its benchmark interest rate to a record low yesterday and President Mario Draghi signaled another reduction is possible.
On ECB’s rate cut:
“Whether fundamentally the cut in interest rates in Europe will send money to Hong Kong, I don’t think so. It helps sentiment more than anything else.
‘‘It’s a sign of relief that (ECB President Mario) Draghi is still focused on helping those who help themselves. That’s the message from Europe. ‘I will help you if you help yourself. But if you do not help yourself I can’t help you.’ Europe is about tough love. In the case with U.S. and Japan, there is a bit of unconditional love.”
“Investors, especially from off-shore, were hoping for some stimulatory measures from the new leadership, but they didn’t come. Investors were disappointed about the lack of stimulus measures and also about the weakening of the economic data relative to expectations.
‘‘In the case with China, there is excess capacity in some areas, and when there is not enough demand, then corporates have to cut prices in order to sell their products and the margin goes straight down.’’
On Chinese stocks traded in Hong Kong:
‘‘Consumer stocks are always expensive, manufacturing and banking stocks are not expensive. But with banking stocks there’s always an issue with potential bad debt. As far as the manufacturing sector is concerned, earnings are too volatile.
‘‘If the People’s Bank of China and the China Banking Regulatory Commission were to do a rigorous stress test on the Chinese banks and prove to the world that they will survive, and they don’t need to raise a lot more capital, then I think that those banks will not trade at these multiples anymore. But we haven’t seen that yet.”