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Improved US-China harmony

Asian stock exchanges were up in October. Carnegie Asia rose 1.9 %.

Central banks continue to inject new liquidity into the markets. This means greater risk appetite and a macro climate that feels fairly stable right now, despite clear signals of slower global growth going forward. The Fed cut interest rates by another 0.25% at the end of October. It signalled no intention to make more cuts right now, but this has been said after every meeting so we will have to wait and see. Donald Trump is likely to want even lower rates ahead of next year’s presidential campaign.

The tone between the US and China has been milder of late. Trump is looking forward to signing a deal in November, or at least phase one of a deal, whereby China will agree to buy US grain and pork for USD 50 billion. This is four times more than normal and would help to shrink the US trade deficit. More important for Trump, however, is to benefit a group of core voters, central US farmers who have been hit hard by the trade conflict. China, for its part, is happy to buy more pork from the US right now as it has been hit domestically by African swine fever.

In return, China receives nothing from the US. Or, at least, Trump refrains from implementing his threatened import tariffs in December, which may be why the proposal is not being called a trade deal in the Chinese media. Either way, this deal does not resolve the important issues and the sequel will almost certainly continue next year.

The holding in Swire Pacific was sold this month. Carnegie Asia made a new Vietnam investment, in Vinhomes, a spin-off from Vingroup, which the fund has also invested in. Vinhomes owns land and develops properties and new residential areas, primarily in eight of the major cities in Vietnam. As the middle class grows and household incomes expand, there is a growing need for modern housing. This trend is also being driven by increased urbanisation in the country. The company has considerable land assets and its development plans extend until 2036.

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