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The potential collapse of Evergrande Group, a major real estate developer in China, had North American stock markets in something of a funk through the early part of the week. The developer’s refinancing options have closed, and it faced the prospect of defaulting on some of its debt obligations. With possible impact that a collapse of the company might have on global banks with exposure to the company as well as on construction-related commodities, stock markets sold off early in the week, but recovered by week’s end to end the week flat or with modest gains.
In addition, inflation continues to be a global concern, showing no sign of slowing anytime soon. Crude oil and food prices, especially, have ratcheted upwards, and these have most impact on consumer inflation expectations. Canadian headline inflation rose to 4.1% in August, up from 3.7% in July, while the U.S. all-items consumer price index was 5.3%, down a notch from the 5.4% posted in July. In its September announcement, the U.S. Federal Reserve Board’s Open Market Committee, said it would begin tapering its quantitative easing program “soon,” without offering any further specifics. It did, however forecast core inflation to notch down to 3.7% by the end of this year, 3.8% unemployment by the end of next year, and median 5.8% real GDP growth for 2021. It also projected a 25-basis-point rate hike next year.
The market tizzy over Evergrande was dampened somewhat late in the week by the Fed’s growing hawkishness and willingness to commit to “soon” as a timeline for tapering. As a result, the S&P 500 Composite Index edged up 0.5% on the week, while the Nasdaq Composite Index recovered earlier losses to end the week flat. With pressure on materials and technology, the S&P/TSX Composite Index ticked down 0.4% on the week, avoid steeper losses as the energy sector strengthened on a 0.9% weekly gain in crude oil prices.
* Pembroke debuts all-cap fund. Pembroke Management Ltd. on Sept. 21 debuted its Pembroke Canadian All Cap Pooled Fund for accredited investors.
“The Fund differentiates itself from the S&P/TSX Composite Index, its benchmark, and the competition, by leveraging Pembroke’s sector research platform and our expertise in growth equities over the past 50 years,” said Nicolas Chevalier, Portfolio Manager and Partner. “The Fund is comprised of high-quality growth companies whose management's interests are aligned with those of investors, a key element of the Pembroke approach.”
The fund’s sector-agnostic, bottom-up strategy allows managers to select 25 to 35 companies with a market capitalization of more than $3 billion. Individual stocks are capped at 7% and sectors at 30%.
* NextEdge launches metals and commodities fund. Next Edge Capital Corp. on Sept. 20 launched its Next Edge Strategic Metals and Commodities Fund to be sub-advised by Delbrook Capital Advisors, Inc. The fund is structured as an alternative mutual fund. The fund will be investing opportunistically in companies involved in the commodity and natural resource industries, as well as those positioned to benefit from rapid technological innovation.
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