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Calling the 'Global South', your time is ... now?: McGeever
Calling the 'Global South', your time is ... now?: McGeever

Zawya

time15-05-2025

  • Business
  • Zawya

Calling the 'Global South', your time is ... now?: McGeever

(The opinions expressed here are those of the author, a columnist for Reuters.) ORLANDO, Florida - The era of 'U.S. exceptionalism' may be over – and with it the Washington-led world economic and financial order of the last 50 years. This leaves investors with a big question, how will this reshape capital flows? The most obvious destination is Europe, home to the world's second-largest economy and second-biggest reserve currency, where markets are deep and liquid and the rule of law reigns supreme. The so-called 'Global South' may seem less attractive. Its 100-plus disparate countries, excluding China, carry the typical smorgasbord of emerging market risks, including political instability, legal concerns and policymaking credibility. But the global economic and investment landscape is changing rapidly and perhaps irrevocably, and investors may be skittish about once again finding themselves over-concentrated in any one region. Investors with long-term horizons and high risk thresholds may therefore increasingly consider boosting their allocations to this enormous and varied 'bloc'. These countries have long punched below their financial market weight. But could they be poised to benefit from a global capital reallocation shift? That's among the findings in a report published last week by Deutsche Bank strategists, 'The Global South: A strategic approach to the world's fourth bloc'. "The time for the Global South is now," states the report, which broadly defines the bloc as the 134 member countries of the G77 group of nations, excluding China, Russia, Singapore and a few others, adding in Mexico, Turkey and some central Asian countries. Some numbers here are worth noting. The group is home to almost two-thirds of the world's working age population, produces 40% of the world's energy and key transition metals, accounts for a quarter of global trade, and has attracted nearly a quarter of all inward FDI over the past decade. Indeed, the Boston Consulting Group says foreign direct investment in the Global South in 2023 totaled $525 billion, surpassing FDI into advanced economies of $464 billion. And while it is far too early to say how countries will align politically, economically, or militarily in the years ahead, there are already signs of rotation of capital into the Global South and away from China. Deutsche Bank's report notes that foreign investment into the Global South has held relatively steady in recent years while flows into China have collapsed to near zero. DIVERSIFICATION AND VALUE GENERATION China's economic rise in recent decades has been one of the most astonishing in human history. In 1990, China accounted for only 2% of developed economies' GDP. By 2021 that figure had reached 33%, almost matching the Global South's then share. But China's growth rates have stalled, especially since the pandemic. The International Monetary Fund forecasts China's share of advanced economies' GDP will end this decade around 35%, while the Global South's share will rise to a new high of 40%. "In the event the U.S. trade war remains concentrated against China, the Global South could evolve into ... a source of diversification and value generation for investors," Deutsche Bank's analysts argue. From an equity allocation perspective, there is a lot of space to grow. The Global South made up a mere 11% of global market capitalization at the end of last year, with two countries - India and Saudi Arabia - accounting for more than half this share. If the dominance of U.S. equities wanes - they currently make up more than 70% of global market cap - even a tiny reallocation to this group could have a big impact on valuations in these countries. The risks, however, are manifold and many were on display during the market turbulence sparked by U.S. President Donald Trump's tariffs. Figures released by the Institute of International Finance last week showed that portfolio flows to emerging markets came to a "standstill" in April. While the Trump administration is rolling back its initial plan to slap enormous tariffs on much of South East Asia, investors may still be anxious about plowing too much capital into countries that could yet get caught in the U.S. crosshairs. "The current environment differs fundamentally from past episodes. This is not an exogenous shock but a deliberate policy action with structural objectives. As a result, the scope for rapid normalization is limited," the IIF said. But what really matters here are not "rapid" moves, but the structural changes in the global economy that the U.S. administration's unorthodox policies may have catalyzed. It's good to remember that Chinese exports to 'conductor economies' in the Global South have doubled since the Trump's first trade war in 2018. Given how unreliable the US now appears, it is reasonable to assume that both China and Europe may be seeking to further diversify their export markets. So perhaps the time is not 'now' for the Global South, but it could be coming soon. (The opinions expressed here are those of the author, a columnist for Reuters)

Gold's bullish sentiment seen easing as record rally stumbles
Gold's bullish sentiment seen easing as record rally stumbles

Yahoo

time28-04-2025

  • Business
  • Yahoo

Gold's bullish sentiment seen easing as record rally stumbles

(Bloomberg) — The gold (GC=F) rally has outshone other asset classes this month — even drawing some comparisons to bitcoin (BTC-USD) — as President Donald Trump's tariff war reshapes the global economic order, pushing investors to look for safety. Now, shifts in options positioning has some market watchers saying it's time to get cautious. Why Car YouTuber Matt Farah Is Fighting for Walkable Cities Newsom Says California Is Now the World's Fourth-Biggest Economy At Bryn Mawr, a Monumental Plaza Traces the Steps of Black History Los Angeles Downgraded to AA- by S&P Due to Budget Woes US Cricket Deepens Bet on Texas With HQ Shift From California As bullion hit a record last week, the trading of options on the SPDR Gold Shares ETF surpassed 1.3 million contracts, a level never reached before. At the same time, the cost of hedging against declines in the exchange-traded fund sits near its lowest level since August while implied volatility has surged, an unusual pattern. 'Gold and bitcoin have exhibited spot-up, vol-up dynamics, similar to Mag 7 in recent years,' said Tanvir Sandhu, Bloomberg Intelligence's chief global derivatives strategist. Call demand for the metal has surged, while the recent drop in the asset has made the implied volatility across strikes more balanced, he added. Also read: Strategist Who Called End of US Exceptionalism Sees No Recovery Gold has already lost more than 6% from its intraday peak last week on signs some trade tensions may be easing. Meanwhile, hedge fund managers have cut their net long futures and options positions on the metal to the lowest level in more than a year, the latest Commodity Futures Trading Commission data show. The recent risk-off period, catalyzed by tariffs and led by the theme that 'US Exceptionalism' is ending, has helped gold's strong outperformance versus other asset classes this month, including Treasuries and US equities. But for Barclays Plc strategists, the metal is running ahead of its fundamentals. In a note last week, they pointed out that the recent streak of monthly gold purchases is not unusual relative to the long-term trend of central banks buying the asset. The outperformance has also brought significant speculation, with calls on the gold ETF skyrocketing after Trump's 'Liberation Day,' leading to an inversion of skew, Barclays's Stefano Pascale noted. That, along with the drop in hedge fund positioning and the recent decline in bullion are reasons to be cautious — at least in the short term, the strategists said. 'We think that gold is going to come down,' Pascale said in an interview, adding that the commodity is 'dislocated' with respect to its 'fundamental drivers' of the US dollar and real rates. 'Technicals are starting to be a little bit stretched.' Garrett DeSimone, head quantitative analyst at OptionMetrics, sees similarities with bitcoin. And to him, both assets could rally further as their implied volatility and skew remain within the long-term historical ranges. 'From the options market perspective, upside and downside weights are pretty even,' he said. With Barclays's proprietary indicator showing that sentiment is still bullish on gold, the strategists recommend selling June calls to buy puts for a zero-cost risk reversal. 'Obviously, the trade is mostly directional, so for this trade to really work gold has to come down,' said Pascale. (Updates with Monday move in fourth paragraph) As More Women Lift Weights, Gyms Might Never Be the Same Why US Men Think College Isn't Worth It Anymore Eight Charts Show Men Are Falling Behind, From Classrooms to Careers The Mastermind of the Yellowstone Universe Isn't Done Yet Healthy Sodas Like Poppi, Olipop Are Drawing PepsiCo's and Coca-Cola's Attention ©2025 Bloomberg L.P.

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