Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics, is a guest at the Investors Panel broadcast of BNR Nieuwsradio. She discusses, amongst other topics, a speech that was given by the chairman of the Federal Reserve and the policy of China concerning public offerings of Chinese companies.
The panel always opens with the same question: what has been your last investment? Pieterse-Bloem answers from her position as Head of Investment Office at Rabobank: Rabobank has decided to invest less in Asia in favour of the United States with its macro fund. Because of the policy of China, performances have been below average in the region of Asia (more on this below).
Policy of the Federal Reserve
The chairman of the Federal Reserve, Jerome Powell, has announced in his new plans that he is considering the possibility to start dismantling the buyback programme of the Fed if the economy continues to recover at this pace. This development fits the expectancies of Pieterse-Bloem: it has been generally accepted that central bankers are relatively cautious. After the presentation of Powell, the market calmed down; at first the market seemed to be alarmed due to the possibility that the buyback programme would get phased out in September. Since the speech of a few days ago, that possibility seems to be very unlikely. Critics of the policy of the Federal Reserve are predominantly economists who are afraid that the policy might have negative effects on the rate of inflation: the current higher inflation rate could be structural but Powell believes that these higher rate is only temporary. Pieterse-Bloem emphasizes that there are two sides in this issue and that it is very hard to make policy in which both sides are appeased. Only the future can tell us which side is right about this question.
China
China is very harsh on companies when they seek to have a public offering in the western world, which means that the autonomy of such companies is strongly impeded. After a Chinese company succeeded in getting a public offering, the government passed a law which strongly restricts the possibility to enter a stock market. It instantaneously cost the company 20% of its value on the stock market. According to Pieterse-Bloem, the interest of the communist party of China lies with preserving itself and the system: 'as long as companies adhere to the rules and ideas of the Chinese party and facilitate them in obtaining data, companies are allowed to exist and grow. However, as soon as the interests of the company and the party don't align anymore, the party is over and the company gets nipped in the bud'. Because of this, the mother company of the famous app TikTok is seeking to go public on the exchange of Hong Kong instead of in America. The accompanying warning is as follows: know as an investor that the stock exchange can be more capricious than in the western world, since actions by the Chinese registration can severely damage the value of a company.
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You can listen to the full broadcast of BNR Nieuwsradio, 31 August 2021, here.