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Better Asia sentiment on the horizon?

Asian markets recovered in June, and Carnegie Asia rose 3.3 %. So far this year, the fund has increased in value by 13.7%.

Chinese companies appear to be more attractively valued after the sharp correction in May. Conversely, the Indian stock market seems a little overvalued. China and India are often traded in opposition to each other.

With the trade war between the United States and China dominating the headlines, China is selling off while India appears to be more defensive. The US increased its pressure on China this past month, ahead of the G20 meeting in Osaka at the end of June. The likely outcome is an agreement on a new ‘ceasefire’, similar to the position in November to February.

It is unlikely the parties will succeed in resolving the more controversial issues on which they diverge significantly, but the US may offer to avoid stepping up import tariffs on China if an agenda for further negotiations can be agreed. At this point, the US seems more anxious for a resolution than China since the trade war is now having serious consequences for US companies, not least in the technology sector. This may be enough to put Asia’s stock markets in a slightly better mood. The Fed is also signalling the approach of an interest rate cut, perhaps as early as September, and the dollar responded by weakening. A softer dollar is beneficial for both Asia’s economies and its stock exchanges. In addition, China is expected to decide on new stimulus to curb the impact of the trade war on its economic growth.

Carnegie Asia’s investments in China were increased this month. The holdings in Alibaba and Ping An Insurance were upped, and a new investment was made in Anta Sports Products, which manufactures and sells sportswear under its own brand. The holding in ASM Pacific was sold. The fund reduced its exposure to India through a sale of Axis Bank. As a result of developments for financial companies, we have become more cautious about the Indian banking sector.

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Carnegie Asia is for those who believe in the power of a young and increasingly well-educated population with high consumption needs. Nearly half the world’s population lives in Asia, and...

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