1 00:00:03,770 --> 00:00:07,010 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:07,340 --> 00:00:10,700 Sean Aylmer: Global markets are turbulent right now as concerns grow over 3 00:00:10,700 --> 00:00:13,880 Sean Aylmer: the latest wave of COVID infections. There have been sharp 4 00:00:13,880 --> 00:00:16,190 Sean Aylmer: drops in markets at various times over the last couple 5 00:00:16,190 --> 00:00:18,380 Sean Aylmer: of weeks from the ASX to Wall Street and the 6 00:00:18,380 --> 00:00:21,440 Sean Aylmer: European indexes, and then they've jumped again. I wanted to 7 00:00:21,440 --> 00:00:24,260 Sean Aylmer: look a bit more closely at trading on these global markets, 8 00:00:24,260 --> 00:00:26,810 Sean Aylmer: how the uncertainty has hit them and how to get 9 00:00:26,810 --> 00:00:35,000 Sean Aylmer: through it if you're an investor. Cindy Leung is the Senior Wholesale Relationship Manager at trading platform CMC Markets. Cindy, welcome to 10 00:00:35,000 --> 00:00:35,659 Sean Aylmer: Fear and Greed. 11 00:00:36,080 --> 00:00:37,290 Cindy Leung: Thanks, Sean. Good to be here. 12 00:00:37,320 --> 00:00:38,990 Sean Aylmer: A lot going on at the moment. I mean, by 13 00:00:38,990 --> 00:00:41,240 Sean Aylmer: the end of last week, we had indices pretty much 14 00:00:41,240 --> 00:00:44,000 Sean Aylmer: close to record levels, maybe not the London's FTSE, but 15 00:00:44,000 --> 00:00:46,280 Sean Aylmer: the others were pretty good. Why are we seeing all 16 00:00:46,280 --> 00:00:48,290 Sean Aylmer: this volatility in global markets at the moment? 17 00:00:48,440 --> 00:00:50,900 Cindy Leung: Yeah, as you mentioned in your intro, the main issue 18 00:00:50,900 --> 00:00:53,930 Cindy Leung: that's on the forefront of everyone's mind is certainly the 19 00:00:53,930 --> 00:00:57,080 Cindy Leung: global pandemic. Just last week, we saw the Dow Jones 20 00:00:57,080 --> 00:01:01,160 Cindy Leung: Industrial Average closed down 725 points, or close to 2.5 21 00:01:01,520 --> 00:01:05,690 Cindy Leung: per cent after dropping as much as 946. It ended the week, 22 00:01:05,690 --> 00:01:08,240 Cindy Leung: pretty much at its high. And so you can actually 23 00:01:08,240 --> 00:01:11,330 Cindy Leung: see that there is a lot of uncertainty surrounding the 24 00:01:11,330 --> 00:01:14,900 Cindy Leung: global recovery. The sell-off comes as the virus continues to 25 00:01:14,900 --> 00:01:17,839 Cindy Leung: spread across Europe and the world, and it's just sending 26 00:01:17,840 --> 00:01:20,690 Cindy Leung: jitters across the market. On the other hand, we've also 27 00:01:20,690 --> 00:01:24,650 Cindy Leung: got inflation, which is causing market volatility and in particular 28 00:01:24,650 --> 00:01:26,929 Cindy Leung: the rate at which it's rising. And this is seen 29 00:01:26,930 --> 00:01:29,600 Cindy Leung: across the globe. So it's not just Australia, the US, 30 00:01:29,600 --> 00:01:32,600 Cindy Leung: Europe and the UK. The CPI (Consumer Price Index), as an example, the 31 00:01:32,600 --> 00:01:36,140 Cindy Leung: CPI in the US jumped 0.9 per cent in June, 32 00:01:36,290 --> 00:01:39,560 Cindy Leung: which is the most since 2008. It well exceeded analysts 33 00:01:39,560 --> 00:01:43,750 Cindy Leung: forecasts of 0.5 is nearly double what was expected. As such, 34 00:01:43,910 --> 00:01:46,730 Cindy Leung: some investors saw the data as putting more pressure on 35 00:01:46,730 --> 00:01:50,630 Cindy Leung: the Fed. The S&P 500 declined following the release of 36 00:01:50,630 --> 00:01:53,840 Cindy Leung: the CPI figures. Even though it was temporary, the Fed and 37 00:01:53,840 --> 00:01:58,310 Cindy Leung: Biden did reinstate that high inflation figures quoted as simply transitory. 38 00:01:58,310 --> 00:02:01,010 Cindy Leung: As such, an increase of interest rates is not likely. So 39 00:02:01,160 --> 00:02:04,520 Cindy Leung: it is statements like this that is actually also causing volatility 40 00:02:04,520 --> 00:02:05,180 Cindy Leung: in the market. 41 00:02:05,780 --> 00:02:08,810 Sean Aylmer: Okay, Cindy, so what about earnings season? Wall Street's in 42 00:02:08,810 --> 00:02:10,550 Sean Aylmer: the middle of earnings season at the moment. We've had 43 00:02:10,550 --> 00:02:13,820 Sean Aylmer: some pretty good numbers out of the big financials particularly, 44 00:02:13,850 --> 00:02:16,280 Sean Aylmer: and some of the tech stocks, too. What's your take 45 00:02:16,280 --> 00:02:18,110 Sean Aylmer: on earnings season on Wall Street so far? 46 00:02:18,560 --> 00:02:21,440 Cindy Leung: Yeah, the earnings seasons. I think the market is expecting 47 00:02:21,530 --> 00:02:25,070 Cindy Leung: quite strong earnings. In fact, companies reporting you'd have to 48 00:02:25,070 --> 00:02:29,180 Cindy Leung: beat analysts expectations to see the stock price continue. I mean, 49 00:02:29,180 --> 00:02:32,000 Cindy Leung: the surprises for me were certainly Nike. That kicked off the 50 00:02:32,000 --> 00:02:35,870 Cindy Leung: US reporting season with a bang, they exceeded earnings expectations 51 00:02:35,870 --> 00:02:39,320 Cindy Leung: by a whopping 89 per cent. So clearly, consumers are 52 00:02:39,320 --> 00:02:41,720 Cindy Leung: taking their exercise very seriously and lockdown... 53 00:02:41,960 --> 00:02:42,500 Sean Aylmer: Seriously! 54 00:02:42,770 --> 00:02:47,209 Cindy Leung: Nike reported an EPS (Earnings Per Share) of $US0.93 cents versus the market expectations of $US0.51. 55 00:02:48,050 --> 00:02:51,020 Cindy Leung: So as I said, that's probably nearly double the expectation. 56 00:02:51,020 --> 00:02:53,450 Cindy Leung: This saw the share price increase by twelve per cent on 57 00:02:53,450 --> 00:02:53,840 Cindy Leung: the day. 58 00:02:54,410 --> 00:02:58,490 Sean Aylmer: It's funny in Australia we expect companies to hit expectations, 59 00:02:58,490 --> 00:03:00,920 Sean Aylmer: perhaps beat them slightly. But in the US or on 60 00:03:00,919 --> 00:03:04,400 Sean Aylmer: Wall Street, it certainly is about beating market expectations. 61 00:03:05,169 --> 00:03:08,089 Cindy Leung: Yeah, that's right. It's possibly because valuations are pretty stretched 62 00:03:08,090 --> 00:03:12,890 Cindy Leung: at the moment. Like, stocks may appear expensive so, given that, 63 00:03:13,370 --> 00:03:16,730 Cindy Leung: the market is expecting companies to beat earnings and not 64 00:03:16,730 --> 00:03:19,700 Cindy Leung: just meet them. If you meet expectations, you pretty much 65 00:03:19,700 --> 00:03:21,079 Cindy Leung: fall short and you'll be punished. 66 00:03:21,860 --> 00:03:24,020 Sean Aylmer: So tell me, what are you expecting from Wall Street 67 00:03:24,020 --> 00:03:25,910 Sean Aylmer: in the next sort of for the rest of this year? 68 00:03:26,120 --> 00:03:27,860 Sean Aylmer: As you mentioned a moment ago, it is at its 69 00:03:27,860 --> 00:03:30,500 Sean Aylmer: highs and valuations are stretched. Do you think it can 70 00:03:30,500 --> 00:03:31,549 Sean Aylmer: continue running? 71 00:03:32,440 --> 00:03:35,150 Cindy Leung: I certainly think it will continue this trend, especially into right 72 00:03:35,150 --> 00:03:37,700 Cindy Leung: till the end of this year. This week will be 73 00:03:37,760 --> 00:03:43,040 Cindy Leung: interesting with Tesla, Alphabet or Google, Apple, Microsoft, Pfizer, PayPal, 74 00:03:43,040 --> 00:03:46,700 Cindy Leung: Facebook and Amazon all reporting. So it will be interesting to see 75 00:03:46,700 --> 00:03:48,680 Cindy Leung: how they report, but I do expect the trend to 76 00:03:48,680 --> 00:03:50,000 Cindy Leung: continue to the end of the year. 77 00:03:50,420 --> 00:03:53,410 Sean Aylmer: And those tech stocks, the so-called FANG (Facebook Amazon Netflix Google) stocks, they haven't 78 00:03:53,420 --> 00:03:55,430 Sean Aylmer: underperformed the Dow, but the Dow has down at least 79 00:03:55,430 --> 00:03:57,530 Sean Aylmer: as well as the FANG stocks this year. So there 80 00:03:57,530 --> 00:04:00,590 Sean Aylmer: really has been a bit of a shift towards those cyclicals, 81 00:04:00,590 --> 00:04:04,040 Sean Aylmer: financials type stocks. But I suppose whether that continues or 82 00:04:04,040 --> 00:04:06,350 Sean Aylmer: not is very dependent on the pandemic. 83 00:04:06,770 --> 00:04:09,140 Cindy Leung: Yeah, it's dependent on the pandemic for a number of reasons. 84 00:04:09,140 --> 00:04:10,460 Cindy Leung: And I think the main thing to look out for 85 00:04:10,460 --> 00:04:13,520 Cindy Leung: is certainly those inflation numbers. As I mentioned earlier, the 86 00:04:13,520 --> 00:04:17,990 Cindy Leung: reason being is interest rates obviously drives forward valuations and 87 00:04:17,990 --> 00:04:19,849 Cindy Leung: hence the reason why you're seeing a bit of a 88 00:04:19,850 --> 00:04:24,600 Cindy Leung: turn around out of the tech stocks pre-pandemic into more 89 00:04:24,740 --> 00:04:26,990 Cindy Leung: your value stocks such as your financials. 90 00:04:27,500 --> 00:04:30,140 Sean Aylmer: OK, so what about Europe? How is that performing? And 91 00:04:30,150 --> 00:04:33,050 Sean Aylmer: I noted late last week, London certainly came off a bit, 92 00:04:33,050 --> 00:04:35,839 Sean Aylmer: but the ECB (European Central Bank) came out and said it expected to 93 00:04:35,839 --> 00:04:38,060 Sean Aylmer: keep interest rates lower for longer and that helped the 94 00:04:38,060 --> 00:04:41,030 Sean Aylmer: European bourses. How would you take a read on that? 95 00:04:41,029 --> 00:04:44,330 Sean Aylmer: Because Europe traditionally has never kind of been favoured by investors, 96 00:04:44,330 --> 00:04:45,650 Sean Aylmer: but it's kind of looking better now. 97 00:04:46,040 --> 00:04:47,960 Cindy Leung: Yeah, and the reason for that, I think, is the 98 00:04:47,960 --> 00:04:51,260 Cindy Leung: success of the vaccine rollout across Europe and the UK. 99 00:04:51,500 --> 00:04:54,140 Cindy Leung: So the UK is sitting at around 60 per cent and 100 00:04:54,140 --> 00:04:56,690 Cindy Leung: the rest of Europe around 50 per cent. And so there 101 00:04:56,690 --> 00:05:00,260 Cindy Leung: is that expectation that the economic recovery will happen a 102 00:05:00,260 --> 00:05:03,080 Cindy Leung: lot sooner than say the rest of the world. The ECB 103 00:05:03,529 --> 00:05:06,230 Cindy Leung: is an interesting one, they recently raised its inflation goal 104 00:05:06,230 --> 00:05:09,860 Cindy Leung: to two per cent. Earlier in the month, President Christine Lagarde 105 00:05:09,860 --> 00:05:12,799 Cindy Leung: hinted that a change to the bank's guidance, which is 106 00:05:12,800 --> 00:05:16,370 Cindy Leung: reflecting slightly higher tolerance for inflation is the new strategy. 107 00:05:16,520 --> 00:05:18,589 Cindy Leung: So what does that mean? It means that the market 108 00:05:18,589 --> 00:05:21,409 Cindy Leung: has taken this as ECB is not likely to react 109 00:05:21,410 --> 00:05:24,320 Cindy Leung: to inflation on more than two per cent by raising 110 00:05:24,320 --> 00:05:28,190 Cindy Leung: rates and more stimulus for longer as the global economy recovers, 111 00:05:28,339 --> 00:05:31,130 Cindy Leung: helping support the market. So there's a lot of stimulus 112 00:05:31,130 --> 00:05:33,140 Cindy Leung: in the market. There's a lot of support there. So the 113 00:05:33,140 --> 00:05:35,599 Cindy Leung: way I take that is that even if interest rates 114 00:05:35,600 --> 00:05:39,720 Cindy Leung: do go above two per cent, there is an appetite for it. 115 00:05:39,740 --> 00:05:42,380 Cindy Leung: Interest rates will not be going up any time soon. 116 00:05:42,920 --> 00:05:44,989 Sean Aylmer: So I suppose the question for an investor, if you're 117 00:05:44,990 --> 00:05:47,180 Sean Aylmer: sitting in Australia and I want to buy into overseas 118 00:05:47,180 --> 00:05:51,380 Sean Aylmer: stocks and you look at Wall Street versus European markets 119 00:05:51,589 --> 00:05:53,750 Sean Aylmer: and Wall Street has done better than Europe over the 120 00:05:53,750 --> 00:05:56,000 Sean Aylmer: last decade or so, is that still going to be 121 00:05:56,000 --> 00:05:58,039 Sean Aylmer: the case or do you think Europe's got a little 122 00:05:58,070 --> 00:06:01,400 Sean Aylmer: bit of steam going there and so it may well outperform? 123 00:06:02,150 --> 00:06:05,120 Cindy Leung: Yeah from the CMC perspective, we certainly see most of our traders in 124 00:06:05,120 --> 00:06:07,340 Cindy Leung: the US market. And so there is a lot of 125 00:06:07,339 --> 00:06:09,620 Cindy Leung: interest there. That may be partly due to the rise 126 00:06:09,620 --> 00:06:13,070 Cindy Leung: of popularity in meme stocks such as GameStop and AMC, 127 00:06:13,070 --> 00:06:16,460 Cindy Leung: for example, or the fact that CMC's recently dropped its 128 00:06:16,460 --> 00:06:20,180 Cindy Leung: brokerage to zero for trading US stocks. And so a 129 00:06:20,180 --> 00:06:22,160 Cindy Leung: lot of the interest is based in the US. 130 00:06:22,370 --> 00:06:24,800 Sean Aylmer: But there must be opportunities then in Europe, I suppose, is 131 00:06:24,830 --> 00:06:25,460 Sean Aylmer: where I'm going. 132 00:06:25,910 --> 00:06:28,580 Cindy Leung: Oh, yes, there certainly is. The European market at the moment 133 00:06:28,580 --> 00:06:31,099 Cindy Leung: is also similar to the US. It's also undergoing the 134 00:06:31,100 --> 00:06:33,800 Cindy Leung: reporting season. And again, the similar trend is that we're 135 00:06:33,800 --> 00:06:38,420 Cindy Leung: expecting earnings to outperform the market there. So more so recently 136 00:06:38,420 --> 00:06:41,419 Cindy Leung: in the reporting season, you've got Julius Baer, for example, which 137 00:06:41,420 --> 00:06:44,119 Cindy Leung: is a Zurich based wealth manager, posted a rise of 138 00:06:44,120 --> 00:06:48,650 Cindy Leung: 23 per cent net profit or SFr. 606 million (Swiss) francs. So, again, 139 00:06:48,650 --> 00:06:52,070 Cindy Leung: you can see that outperformance in market there. Novartis, which 140 00:06:52,070 --> 00:06:55,940 Cindy Leung: is a drug maker, beat expectations for the second quarter. So, again, 141 00:06:55,940 --> 00:06:57,599 Cindy Leung: a lot of opportunities in Europe. 142 00:06:57,960 --> 00:07:00,890 Sean Aylmer: OK, so what about Asian markets? Is there much interest 143 00:07:00,890 --> 00:07:02,600 Sean Aylmer: in Asian markets at the moment? And I suppose the 144 00:07:02,600 --> 00:07:06,170 Sean Aylmer: main ones are Hong Kong, Shanghai, Singapore, Japan. 145 00:07:06,589 --> 00:07:09,410 Cindy Leung: Yeah, that's right. Asian markets tend to be lagging other 146 00:07:09,410 --> 00:07:12,740 Cindy Leung: major currencies. And this may be due to the slow 147 00:07:12,740 --> 00:07:15,710 Cindy Leung: rollout of the vaccine. The US, Europe and UK, as 148 00:07:15,710 --> 00:07:18,650 Cindy Leung: I mentioned, have over 50 per cent of their population vaccinated 149 00:07:18,650 --> 00:07:21,710 Cindy Leung: versus Hong Kong and Japan sitting at around 20 per cent. 150 00:07:22,100 --> 00:07:25,020 Cindy Leung: There's expectations that the economies in the US, Europe and 151 00:07:25,020 --> 00:07:28,670 Cindy Leung: the UK will outperform that of Asia. Having said that, 152 00:07:28,880 --> 00:07:32,480 Cindy Leung: this will certainly turn around once we see those vaccination 153 00:07:32,480 --> 00:07:35,810 Cindy Leung: rates increase. At CMC Markets, the Hong Kong market is 154 00:07:35,810 --> 00:07:39,950 Cindy Leung: the most popular for our customers, with trading in Tencent, Alibaba. 155 00:07:41,120 --> 00:07:43,340 Sean Aylmer: So what about trading in some of those Chinese companies 156 00:07:43,340 --> 00:07:46,130 Sean Aylmer: at the moment? Has it come off a touch, given 157 00:07:46,130 --> 00:07:49,550 Sean Aylmer: some of the changes in policy from the Chinese government? 158 00:07:49,880 --> 00:07:51,470 Cindy Leung: I think in the last few months we've seen that 159 00:07:51,470 --> 00:07:54,890 Cindy Leung: stabilise a lot more. If we're going back a year, yes, 160 00:07:55,160 --> 00:07:57,590 Cindy Leung: you certainly see a lot of volatility there, especially with 161 00:07:57,590 --> 00:07:59,020 Cindy Leung: the riots that's going on. 162 00:07:59,510 --> 00:08:01,450 Sean Aylmer: Stay with me, Cindy. We'll be back in a minute. 163 00:08:06,470 --> 00:08:10,310 Sean Aylmer: My guest this morning is Cindy Leung from CMC Markets. Okay, Cindy, 164 00:08:10,760 --> 00:08:13,100 Sean Aylmer: I want you to give me a 101 now. Let's say I've 165 00:08:13,100 --> 00:08:15,970 Sean Aylmer: got ten thousand dollars and I want to invest it overseas. 166 00:08:15,980 --> 00:08:18,410 Sean Aylmer: I don't want, like, the local market. So I'm going 167 00:08:18,410 --> 00:08:20,990 Sean Aylmer: to go to Wall Street or let's say London or 168 00:08:20,990 --> 00:08:23,810 Sean Aylmer: one of the European markets or one of the Asian markets. 169 00:08:24,150 --> 00:08:26,240 Sean Aylmer: I'm not asking you where I should go. That's okay. 170 00:08:26,240 --> 00:08:29,120 Sean Aylmer: But what should I be thinking about? And I'm leading 171 00:08:29,120 --> 00:08:31,910 Sean Aylmer: you down a path of exchange rates, what to look 172 00:08:31,910 --> 00:08:34,040 Sean Aylmer: for in funds, that sort of thing. So if someone 173 00:08:34,040 --> 00:08:36,650 Sean Aylmer: with ten thousand to invest overseas, what are the things 174 00:08:36,650 --> 00:08:38,660 Sean Aylmer: I should be going through as an investor in my mind? 175 00:08:39,110 --> 00:08:41,510 Cindy Leung: I think you should be going for big name brands 176 00:08:41,510 --> 00:08:43,429 Cindy Leung: that you're comfortable with. And yes, I do think, as 177 00:08:43,429 --> 00:08:45,410 Cindy Leung: I said earlier, I do think the market may be 178 00:08:45,410 --> 00:08:48,140 Cindy Leung: a little bit expensive at the moment. However, given the 179 00:08:48,140 --> 00:08:51,200 Cindy Leung: low interest rate environment and as the economies start to 180 00:08:51,200 --> 00:08:53,929 Cindy Leung: recover from the pandemic, my preference is still to be 181 00:08:53,929 --> 00:08:56,689 Cindy Leung: invested in the market. In my opinion, we should be buying 182 00:08:56,690 --> 00:08:59,660 Cindy Leung: the dips. And as you mentioned, when trading international shares, 183 00:08:59,809 --> 00:09:02,540 Cindy Leung: you've just got to factor in the currency movements. Again, 184 00:09:02,720 --> 00:09:05,720 Cindy Leung: what affects the currency movements is certainly interest rates as well. 185 00:09:05,720 --> 00:09:07,790 Cindy Leung: So keep an eye out for the inflation figures. 186 00:09:08,270 --> 00:09:10,940 Sean Aylmer: The theory being that if inflation comes through, interest rates 187 00:09:10,940 --> 00:09:13,380 Sean Aylmer: will rise and markets could get hurt. 188 00:09:13,490 --> 00:09:14,780 Cindy Leung: That's correct. Yes, that's right. 189 00:09:14,990 --> 00:09:18,000 Sean Aylmer: Okay. And then, again, you've got my ten thousand dollars. And, 190 00:09:18,200 --> 00:09:19,819 Sean Aylmer: if I had money, I'd put it into the local 191 00:09:19,820 --> 00:09:22,010 Sean Aylmer: share market, I suppose. What are some of the benefits 192 00:09:22,010 --> 00:09:23,970 Sean Aylmer: you get from overseas markets, though? 193 00:09:24,170 --> 00:09:27,620 Cindy Leung: Well, in the Australian market, we're really driven by two sectors, really. 194 00:09:27,620 --> 00:09:29,840 Cindy Leung: It's the mining and the banks. And so if we're 195 00:09:29,840 --> 00:09:32,540 Cindy Leung: looking out for a more of a diversified portfolio, you 196 00:09:32,540 --> 00:09:35,059 Cindy Leung: really need to look offshore and especially on the value 197 00:09:35,059 --> 00:09:38,939 Cindy Leung: front and growth front as well. Leverages into technology, for example, 198 00:09:38,970 --> 00:09:44,450 Cindy Leung: the best placed companies like Facebook, Netflix, Alibaba, for example, 199 00:09:44,760 --> 00:09:49,070 Cindy Leung: are all based offshore. And so you just get a greater diversification, 200 00:09:49,070 --> 00:09:51,570 Cindy Leung: a well-rounded portfolio if you do look offshore. 201 00:09:51,770 --> 00:09:53,560 Sean Aylmer: Cindy, thanks for talking to Fear and Greed. 202 00:09:53,929 --> 00:09:54,590 Cindy Leung: Thank you, Sean. 203 00:09:55,040 --> 00:09:59,420 Sean Aylmer: That was Cindy Leung, Senior Wholesale Relationship Manager at CMC Markets. 204 00:09:59,660 --> 00:10:01,670 Sean Aylmer: This is the Fear and Greed Daily Interview. Join me 205 00:10:01,670 --> 00:10:04,220 Sean Aylmer: every morning for the full Fear and Greed podcast with 206 00:10:04,220 --> 00:10:07,080 Sean Aylmer: all the business news you need to know. I'm Sean Aylmer. 207 00:10:07,100 --> 00:10:07,809 Sean Aylmer: Enjoy your day.