Trade tensions ease as the much-awaited phase-1 trade deal between the US and China was signed in Washington. The agreement aims to sharply increase sales of US goods and services to China, help protect intellectual property and further open Chinese markets.
Richard Harris, chief executive of Port Shelter Investment Management said, “They say buy on rumours and sell on facts. This deal has been a long rumour, there have been no details published of this 86-page report but we have known many of the details all the way through. There are three main areas, one is the issues about intellectual property, the other is about currency and Beijing being a currency manipulator, and the third thing is Beijing’s pledge to buy a lot of agricultural goods. Those three issues have generally been in the markets for the last week or two. So, it has probably come as no real surprise,” he said.
“Phase-II is going to be a lot harder but don’t forget phase-I also includes a lot of enforcement provisions. China hasn’t had the best track record about pulling through a lot of agreements in this area. So, Phase-I isn’t necessarily over until it is over. Phase-II, will see some discussions before November. I don’t see anything happening too quickly. The US becomes incredibly pre-occupied by the election from around July onwards,” he added.
Speaking about reflationary environment in emerging markets (EMs), Harris said, “I think there is enough good news out there and some signs of recovery of markets that haven’t done quite so well recently. One of the reasons why we are seeing financial asset growth in the last year or two is because there has been an extraordinary amount of liquidity being created."
Talking on the dollar trajectory, he said, “According to the Big Mac index, the US dollar is very much on the stronger side, so there is room for it to come back. Also, it is not unusual, if markets see a bit of a fillip this year - we see Japan picking up, we see Europe picking up. For the dollar to weaken, it almost tried to do it back in about 2015, 2016 and 2017, never quite made it, the dollar is still the king.”