Investment Comments 03 September 2012

The ECB meeting this week will probably lower the main refinancing rate to 0.5% and rework the bank collateral structures. This and the probable additional bond repurchasing scheme is to give the hope that banks will start to lend to clients and not just to their own governments again. All this is possible and probable nothing is factual. The markets await news.

European data shows that the economy as a whole is weakening. On the other hand, the German economy is strong even if the purchasing manager’s index is gloomy; the PMs are worried about their sales to southern Europe.

It is the southern economies that are suffering from having (in their eyes) an overvalued currency making them uncompetitive. This can’t go on indefinitely.

In China, the economic slowdown was intended, the People’s Bank of China having been concerned about soaring house prices. Chinese banks have huge and disastrous levels of bad property loans, but there are many sound companies.

Growth in Thailand and Indonesia is less export driven than before. The domestic economies are picking up. Japan and Korea are still directionless, though there are hopeful signs.

Suggested Action:

Buy: Northern European Equities and Corporate Bonds

US Profitable company equities and bonds

Sell: Anything to do with financial companies anywhere in the world