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On the home front

The coup in Thailand came at an unfortunate time as far as I was concerned. There I was in a television studio, with the first interview completed. I was awaiting the next opportunity to share my opinions on what the market might be about to do when the news broke and my thoughts on Footsie behaviour became relegated to the cutting room floor. Not that the coup appears to have had any great implications. With tourism such an important element on Thailand’s economic mix, the army generals went out of their way to explain that their intervention was a temporary necessity and that everything would be returned to normal as swiftly as possible.

With so much manufacturing and service activity emanating from the Far East and the sub-continent, what is happening on the other side of the world has a growing importance for investors back home. The stumble in Asian stockmarket performance as the flight to quality took hold in early spring could have heralded some wider concerns.

As it happens, the feedback from the region has been largely positive. The threat of a US slowdown clearly does have potential implications for the pace of economic growth but the great majority of those canvassed expressed confidence in the future. Japan, in particular, came in for a mention. Widely seen as a principal beneficiary of the explosive growth being enjoyed by China, the Japanese stockmarket has, however, proved a laggard to others so far this year, perhaps as a consequence of having returned the best performance of any developed market during the previous 12 months.

There have been some disappointing numbers published but those that believe the Japanese economy is going through a structural change which will deliver real benefits are growing in number.

There are signs of a general slowdown in China’s economic growth but it has to be said that this is from a very strong picture that has obtained for a considerable period. The numbers beggar belief when you compare them with what we are used to in the mature economies of the Western world. Retail sales growth was little changed in August at +13.8 per cent, money supply growth slowing to +17.9 per cent, fixed asset investment easing with an increase of only +29.1 per cent – all stunningly impressive.

Back home, the nervous nature of investors has continued to hold sway as concerns over inflation and interest rates persist. Money markets have factored in two further rate rises by the MPC. The Governor of the Bank of England may yet have to explain to the Chancellor why the inflation rate has breached the 1 per cent margin within which monetary policy is expected to hold it. Making progress as this year draws to a close will not be easy although I am cheered to learn that my quantitative colleagues believe that the numbers reinforce the case for investing in equities.

Brian Tora is investment communications director at Gerrard Investment Management


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