Weekly Market Update

02/12/2019

The UK general election on 12 December continued to dominate UK headlines, with sterling benefitting from a well-regarded poll that put the Conservatives on course for a solid win. However, we know from past events that polls often get it wrong and the chances of a hung Parliament remain strongly alive. What is clear is that investors have been purchasing UK stocks that are exposed to the domestic market on the basis these will rally in the coming months as political risk dissipates.

Concerns that a solution to the trade war had been stymied by the US’s strong reaction to protests in Hong Kong kept a dampener on gains. Hong Kong district elections on Sunday, delivered a sharp reprimand to the territory’s governor and Beijing. The near-clean sweep for pro-democracy candidates on a record-high turnout was rewarded with a rally in the Hang Seng Index. The vote doesn’t significantly affect the balance of power, but it is Hong Kong’s only fully democratic election and thus sends a powerful message to the government. Meanwhile, the US passed a bill protecting the rights of protestors in Hong Kong, adding insult to injury for Beijing.

MSCI completed the third and final phase of its partial inclusion of China A-shares in the MSCI indexes, including the MSCI Emerging Markets index. Although still a relatively small percentage it has added 472 Chinese A-share companies, comprised of 244 large-cap and 228 mid-cap securities. This trend will only grow as corporate governance improves providing a wider universe of stocks to invest into.

Ahead of the UN Climate Change Conference in Madrid on 2-13 December, the European Parliament approved a resolution declaring a climate and environmental emergency in Europe and globally. Although still relatively niche, the rate of issuance of green bonds has accelerated sharply this year, and this remains an important structural theme for investors and markets alike.

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