Equities were broadly lower across the past week with the SPX initially dipping lower to the 4130 levels before finishing the week strong, owing to strong corporate earnings.Biden's proposed capital gains tax increase is likely to find its way to Congress this week and we could have a repricing lower if it becomes likely to pass. Some argue that the measures would incentivize big institutional investors to reduce their securities' holding period, in order to minimize their tax bill. The tax increase is only expected to affect the highest bracket with those earning more than USD 1 Million a year. The carried interest provision that has historically benefitted PE firms and Hedge Funds could be scrapped too.
Europe and South Asian equities were in the red this week as well with North Asia in the green led by China. Investor flows have picked up here after the Alibaba antitrust investigation was closed and the state regulator appeared supportive of Huarong last week. Huarong's earnings will likely face another delay though and will not be out by 30 April. The stock has been suspended from trading in HK after results were postponed on 30 March and speculation of a potential restructuring are still making the rounds with the extent of the write-down still unknown. The management and the regulator are sticking with their assertion of ample liquidity for now.The world's fastest GDP growth in 2021 was supposed to come from India, with recent IMF estimates above 12% and the RBI estimating upwards of 10%. Things seemed to be turning a corner in Q1 but the explosion in cases over the last month and the existence of a new variant have significantly hurt expectations. Medical supply shortages abound in major cities with access to oxygen and respiratory medication severely hampered.On the bright side, the vaccine drive is still on track and will be opened up for everyone aged 18 and above from next week. Authorities have also stopped short of calling for a full lockdown and hope a combination of vaccination and common sense will help bend the curve this time around.Ahead this week, we have rate decisions from Japan and the US with Q1 GDP growth from the US and Germany as well. The strength of the US labor market will likely be affirmed alongside strong Q1 corporate earnings with the near-term risk to sentiment coming from proposed tax reform.
April 27, 2021
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