Talking points this week: complexity, clues and caution

All of the market pundits and quantitative indicators that have advised caution since the start of the October rally have had an egg on their face. Partly due to the inherent strength of Indian markets and partly due to rising CPI data in global markets, there is a near-term case for continued optimism. But are there enough reasons for caution? We could say yes.

India’s valuations are among the highest, if not the highest, in the emerging market landscape. UBS’s Sunil Tirumalai on the sidelines of the UBS India conference discussed how the potential rise in deposit rates may affect savings that have so far been introduced to Indian markets by retail investors. There is also a case of how higher crude prices (if China reopens) can impact the CAD and currency, and thus impact Indian markets. For now, staying bullish has helped. But the arguments are solid and worth pondering.

Changpeng “CZ” Zhao walked away from his bailout for Sam Bankman-Fried’s almost as quickly as he offered a bailout. As a Bloomberg article put it, it became apparent within hours that rescuing FTX would be a difficult task for Binance. Its leaders have found themselves facing a financial black hole – a gap between liabilities and assets at FTX that is likely to be in the billions. Cryptocurrency prices plunged for a second straight day after crypto exchange Binance announced it was pulling out of a deal to buy failing rival FTX Trading. Ether, the coin linked to the ethereum blockchain and the second largest cryptocurrency, also fell more than 10% on Thursday to below $1,200. Although there was an uptick following the risky mood following the US CPI data, bitcoin remains more than 60% off its all-time high, hit exactly a year ago. In terms of fallout, the FTX debacle is impacting investor confidence in the short to medium term. The extent of the losses has not yet been estimated, but rumors say that FTX has a big hole. The cascading effects of this development would only be known over a period of time. However, this side of the investment world remains unpredictable and next week’s events will be watched closely.

All in all a very interesting week has passed and would have implications for what follows in the coming week. After another US inflation surprise, CPI data will dominate the agenda in most other markets over the coming week, shifting the focus somewhat away from the greenback. The pound is likely to get the most attention as it will be a busy week for the UK as apart from economic releases, the fiscal statement will be watched amid continued concerns over high borrowing. Growth indicators will be important in China and Japan, while in the United States the main highlight will be retail sales figures. And in the case of India, eyes on the close of the earnings season and global sentiment.

Niraj Shah is an editor at BQ Prime.

Sharon D. Cole