Mackenzie Minute: November 30, 2018
Nelson Arruda, Portfolio Manager from the Mackenzie Multi-Asset Strategies Team, talks about the broader impact of a strong US dollar on China.
NELSON ARRUDA : The US dollar strength has been particularly surprising in 2018 and this has been problematic for emerging markets, especially China. Chinese growth has slowed down recently and a lot of this has been to the derisking of their financial markets as well as the slowdown in global trade. The Chinese Central Bank has been well aware of the problems facing the Chinese economy and has been using stimulus to help regenerate growth in the area.
We'll be looking very closely at Chinese economic data to determine whether the economy is bottoming out and stimulus is actually helping to regrow the economy, or whether or not the tariffs and slowdown in global trade will actually continue to destabilize growth in the area. We'll also be paying attention to the Central Bank of China to determine whether they will be supportive of the currency. Currency destabilization can actually cause capital outflows which would destabilize the Chinese economy further.
I manage the Mackenzie Multi-Strategy Absolute Return Fund which is a fund that uses various strategies to generate returns that are uncorrelated to equity markets. These strategies include investments in commodities and currencies. China remains one of the largest consumers of commodities globally and represents marginal demand in that area. They are also one of the largest players in global trade and therefore have a huge impact on currency prices. Currently our positioning is long US dollar against most currencies globally but we will be paying attention to the Chinese economy very closely to ensure our positioning is appropriate.