“Your Money 2019” – GMT Markets Economic and Business Forum

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“Your Money 2019” – GMT Markets Economic and Business Forum

Posted on December 10, 2018

“Your Money 2019” – GMT Markets Economic and Business Forum sponsored by the Commonwealth Bank held at Novotel, Glen Waverley on the 8th of December.

At the end of each year, GMT Markets Economic and Business Forum brings together bankers, senior officials from international financial institutions, high net-wealth clients, investors and representatives from business society.

We are proudly to announce that our Economic and Business Forum was a great success on Saturday 8/12, with over 350 attendees!

Our Guest speaker Prof. Shi Heling; a highly experienced economist, consultant and CEO of a top 20+ E-commerce consulting firm had given a spectacular speech about analysis trends of international economics and political fundamentals in 2019.

A review of Prof. Shi Heling’s speech:

The World’s Economic Outlook 2019 – Global economic growth slows down

The growth rate of global trades and investments have accelerated, and the economic growth rate of major developed economies have picked up first. The strong upstream demand has pushed up commodity prices, which has brought the energy-based countries back to growth.

Following the financial crisis in 2009 there was an increase in the global economic growth, however, in 2018 the global trade protectionism had occurred again, trade frictions had intensified while the United States had entered interest rate hikes and China’s economy had slowed down. Therefore, there is an uncertainty of growth for the global economic trends in 2019.

The impact of trade friction on GDP increases pressure on emerging markets

Australia’s economic growth could suffer a severe setback as the country’s exporters risk being caught up in the mounting trade war between the United States and China.
The tensions between the world’s two largest economies will hit Australian exporters and consumers, with fears a trade-induced economic shock would crimp global demand, hitting farmers, miners and manufacturing suppliers.

Two of Australia’s most significant exports – the resources and education sectors – are particularly exposed, with a falling Chinese currency weakening its buying power, discouraging Chinese parents from sending their children to Australian universities, and a slowing economy reducing demand for iron ore and coal.

A stronger dollar and rising short-term US interest rates have stunned emerging markets with investors dumping stock and bond funds. The prevalence of trade protectionism comes from the increase shares of emerging markets in global economics and trade. At a time when incentive policies are gradually fading out, and endogenous growth is insufficient, the benefits and costs of globalisation are being restructured.

OECD economic growth is expected to slow down

Growth forecasts for next year have been revised down for most of the world’s major economies. Global GDP is now expected to expand by 3.5% in 2019, compared with the 3.7% forecast in last May’s Outlook, and by 3.5% in 2020.

In many countries, unemployment is at record lows, and labour shortages are beginning to emerge. But rising risks could undermine the projected soft landing from the slowdown. Trade growth and investment have been slackening on the back of tariff hikes.

The shakier outlook in 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil, while the further slowdown in 2020 is more a reflection of developments in advanced economies as slower trade and lower fiscal and monetary support take their toll.

US economic outlook 2019

A tight labour market buttressing private consumption, coupled with heightened government spending, should continue to support growth. Despite this, the economy looks set to slow in 2019 and 2020 as the fiscal stimulus fades and steady interest rate hikes drag on growth. Moreover, a further escalation of the trade war with China could weigh heavily on investment and the trade sector in the medium-term. Experts see GDP expanding 2.5% in 2019, unchanged from last month’s estimate.

The economy maintained a solid pace of growth in the third quarter following Q2’s four-year high reading, underpinned by private outlays and replenishment of inventories.

Despite the robust headline print, all was not rosy: Exports contracted for the first time in nearly two years, business investment decelerated significantly, and residential investment continued its decline. That said, private consumption should remain buoyant in Q4, thanks to strong job gains (fell to 3.7%), rising wage growth and near-record consumer confidence as of October.

What is going to happen in 2019?
– US GDP growth; 5% in 2019
– The unemployment rate will drop to 3.5% in 2019
– Inflation will be at 2.0% in 2019
– US manufacturing; productions will slow down to 2.6% in 2019

The US dollars will continue to decline:
– A weak dollar increases import prices, which contributes to inflation
– Lowers export prices
– Encourages economic growth
– Supports the stock market

China’s economic outlook 2019

China’s economic growth has slowed down. However, exports have remained strong.

The Chinese economy is expected to lose steam next year as it settles into a more sustainable economic trajectory. While a looser fiscal stance and accommodative monetary policy should taper the incipient slowdown, a prolonged trade war with the U.S. or a potential sharp real estate market correction could weigh markedly on growth prospects.

Expects to see the economy growing 6.3% in 2019, which is unchanged from last month’s forecast, before decelerating slightly to 6.0% in 2020.

A reprieve in trade tensions materialised at the G20 summit in early December when the two economic superpowers agreed to a 90-day truce on new tariffs. However, significant discrepancies between the two sides’ positions on key trade issues cast doubts over the ceasefire.

Meanwhile, the economy continues to grapple with slower growth dynamics. Following a softer Q3 GDP reading, data for Q4 tells a similar narrative. A weak turnout in retail sales in October, despite the increase in the minimum threshold for paying personal income taxes on 1 October, and a drop in new yuan loans in the same month point to a slowing domestic economy.

Nevertheless, stronger industrial production and a pick-up in fixed-asset investment in October suggest some of the government’s stimulus measures have begun to feed through.

China’s Macroeconomic Policy 2019

– Expanding Fiscal Policy: Tax Reduction and Government Investment
– Expansionary Monetary Policy: Reduce Bank Reserve Rate
– Strengthen Capital Control
– The RMB exchange rate is affected by three factors: 1) The trend of a long-term depreciation 2) The policy of stabilising the currency 3) Trade war

Australia’s Economic Outlook 2019

Robust growth is expected in 2019. A further tightening in the labour market should translate into faster wage growth. This coupled with moderate inflationary pressures, ought to stoke consumer spending.
Moreover, robust demand for commodities will support the external sector while fixed investment is expected to expand, albeit at a modest pace, bolstered by rising non-mining business investment and public infrastructure spending.

Uncertainty ahead of May’s election could unsettle investors, however, while softer growth in China and a possible reignition in global trade tensions cloud the outlook. Experts expect GDP to expand 2.7% in 2019, down 0.1 percentage points from last month’s forecast, and 2.6% in 2020.

The economy hit the brakes in the third quarter as falling house prices, tightening financing conditions and sluggish wage growth squeezed consumer spending.

Nevertheless, according to available indicators, growth should regain some pace in Q4 given that retail sales accelerated, the labour market continued to add jobs in October, consumer confidence improved throughout the quarter, and given the sharp drop in oil prices since early October.

Despite the weak showing in Q3, the IMF acknowledged in mid-November that the economy is successfully completing a rebalancing process which follows the end of the commodity price and investment boom and praised the government’s responsible fiscal strategy.

However, the Fund also highlighted household debt as a source of systemic risk and accordingly suggested that the cabinet further strengthens the financial sector’s regulatory framework.

Australia’s Federal budget 2018

– Flat personal income taxes
– Reduce corporate income taxes
– Additional infrastructure investments will turn profitable within 3 years

Australia’s Monetary policy 2019

In theory, RBA should follow the Fed to increase interest rates and avoid capital outflows; however, higher interest rates on the Australian real estate market will cause a recession.

RBA’s evaluation of the Australian economy is that the leading economic indicators are within reasonable limits; therefore, The RBA should maintain a 1.5% rate for a relatively long period.

Thank you to our sponsors!

A big thank you to The Commonwealth Bank, Waverley BMW, Moyan and ML Tax Solutions for sponsoring GMT Markets and providing our clients with grand prizes.

Our lucky attendee who had won our GMT Market’s grand prize of an iPhone.

On behalf of GMT Markets, we would also like to thank our guest speakers:

Prof. Shi Heling is a highly experienced economic researcher and consultant. His research interests focus on the theory of the firm, institution and organisation, and international trade and development strategy.

James Zheng has over 20 years of experience as a Feng Shui Practitioner.
James often exchanges his knowledge with well-known Feng Shui Masters from Hong Kong, Taiwan and China.
He believes that in the modern society where technology and wisdom are developing at such a rapid rate, Feng Shui will display its unique function.

Flynn Sun (GMT Markets Chief Market Analyst Head of Research) has had over 7 years of foreign exchange and stock market investment experience.
His primary focus is on gold and the Australian dollar exchange rate trends.
Flynn has managed to accurately grasp the trend of the US dollar and gold after the Fed’s interest rate growth in the past two years.