Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Trade tensions near breaking point, more on APA

Peter Warnes  |  22 Jun 2018Text size  Decrease  Increase  |  
Email to Friend

Much to the chagrin of many global leaders and investors, President Donald Trump is delivering on his election promises to those who voted for him in November 2016. He is doing what it takes to Make America Great Again and doing it his way. The president has two negotiating colours, black and white, there is no grey.

He has surrounded himself with those like-minded. Those who did not agree with or adhere to his directives were very temporary West Wing dwellers. If the traditions of global trade are disrupted so be it. Protectionism is in the ascendant and trade tensions are stretched almost to breaking point. A wall will be built to stem or stop the flow of illegal immigrants across the US southern border. American jobs will be protected. Mexican pole vaulters will likely be the big improvers at the next Olympics.

Trump was supported by the rust and wheat belts of the US and he is returning their faith that he would deliver on his promises. But trade policies are enacted by politicians who are supporting their constituents and Newton's third law of motion comes into play--"For every action, there is an equal and opposite reaction." This is now clearly on display in the global trade arena where tariffs are the weapons of combat.

Across the globe, uncertainty has reached critical levels and is clearly demonstrated by: Trump's unconventional behaviour; trade tensions particularly between the two largest economies; political upheaval in the European Union involving Italy, Spain and Germany; possible reintroduction of sanctions against Iran; a confrontational G7 summit; an unconvincing two-hour summit between the US and North Korea; and slowing Chinese economic growth.

And while this uncertainty has encouraged volatility in financial markets, there are some positives. Demand for safe-haven assets has increased, in currencies Yen and Swiss francs and quality sovereign bonds. The demand for US bonds is providing the Fed and the US Treasury with an opportunity to sell bonds without pushing yields higher. Without the safe-haven demand and given the inflation concerns of Fed chairman Jerome Powell and tightening monetary policy, yields would be rising.

The US yield curve continues to flatten, helped by safe-haven buying at the longer end. In the past four months the spread between 2- and 10-year yields has halved from 72 to 36 points. The bond market is far from convinced about sustainable economic growth and inflationary concerns. Trade tensions are playing into its hands, as global growth will be affected should trade flows slow meaningfully.

APA – Beware the Trojan Horse

CK Infrastructure Holdings (CKI) is Hong Kong's largest publicly listed infrastructure company. It is part of the much larger Cheung Kong Group. Over several years it has patiently and painstakingly accumulated a substantial portfolio of infrastructure and energy assets in Australia.

Wht grad
Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Subscribe to Morningstar Premium and get access to invaluable investment research from Morningstar's award-winning and independent team of analysts, the high-performing Morningstar Income Equities Portfolio, indispensable stock and fund screening tools, and much more.

button

Already a Premium Member? Read it here

 

Peter Warnes is Morningstar's head of equities research. Any Morningstar ratings/recommendations contained in this report are based on the full research report available from Morningstar.

 


Ymw feedback

Your feedback on this week’s Overview is always welcome. Send your comments to YMW@morningstar.com. We’d love to hear from you.

 


© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written content of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

is Morningstar's head of equities research.

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend