Element ONE
Issuer: ELEMENT ONE LTD
ISIN Number: VGG299771086
IssueDescription: USD CL B SHS
ISO CFI: CICXXX
In September 2020 Elemеnt ONE Fund showed a negative result -3,46%.
S&P 500
In September, a correction was observed in the US stock market after a five-month growth. The S&P 500 was down 3.92%. The vector of monetary policy in developed countries remains the same: long-term near-zero interest rates, an increase in the inflation target, and an increase in the money supply. Against the background of super mild PrEP, potential risks increase. Relations between the United States and China are gaining new negative momentum, tensions in the oil market are growing, and less than a month is left before the US elections. Our expectations for increased volatility remain.
Central bank rates:
FRC: 0,25%
ECB: 0%
CB RF: 4,25%
Labor market
Crisis
- The US Congressional Budget Office reports that this year the amount of outstanding US public debt will reach 98% of the country’s GDP (a record value since World War II) and will exceed it next year. The United States has never declared a default on the national debt and is unlikely to do so in the near future, but the long-term risks of such an event are growing.
- France plans to spend $118 billion on economic recovery. The incentive is 4% of GDP.
Trade wars
- China may gradually reduce its US national debt from its current $1 trillion and more to $800 billion, as a sharp increase in the US budget deficit increases the country’s default risks and the Donald Trump administration continues its violent attacks on Beijing.
- Trump promises tax breaks for all companies that move production to the United States and tariff increases for all companies that create jobs abroad. The US Pension Savings Council has given up investing in Chinese equities.
Russian market
Russian Minister of Finance Anton Siluanov:
- The budget deficit of the Russian Federation in 2020 will be about 4% of GDP;
- Reduction of the RF GDP in 2020 will be less than 4%;
- Unemployment in Russia is reaching pre-crisis trends, consumer demand is recovering;
- Russian banks will come out with a profit from the current situation, in contrast to many sectors of the economy, there are opportunities to reduce interest rates on loans;
- Russia needs to value the trust of foreign investors; without them it will not be possible to fulfill the borrowing plan in 2020;
- Russia is approaching the level of public debt of 20% of GDP, it is still safe, but it should not be exceeded (Bloomberg).
CB RF:
- Annual inflation in Russia as of September 14 accelerated to 3.7%; Forecast for inflation for 2020 – 3.7-4.2%, for 2021 – 3.5-4%;
- Net capital outflow from Russia in January-August grew 1.7 times compared to the same period last year and amounted to $ 34.8 billion.
Rosstat has improved its estimate of the decline in Russia’s GDP in the second quarter of 2020 – to 8% from 8.5%, for the first half – to 3.4% from 3.6%.
Sanctions
- The threat of new sanctions in connection with the poisoning of Navalny remains.
- An uncertain situation due to the possible participation of Russia in the affairs of Belarus.
- The EU, the US and a number of other countries are considering the application of sanctions against Minsk.
- The EU extended sanctions against Russia for actions in Ukraine for another 6 months.
Geopolitics
- Armed conflict between Armenia and Azerbaijan with the use of aircraft and the possible use of long-range strike systems.
- Belarus has deployed almost half of its army along the borders.
- Turkey moves tanks to the Greek border amid tensions in the Mediterranean.
Oil
The oil market also showed a downward trend. The cost of the WTI brand decreased by 5.50% – from $40.39 to $42.61.
Saudi Arabia, Qatar, the United Arab Emirates and Iraq are cutting their selling prices for their oil for October, indicating a slowdown in demand recovery.
Bank of America predicts that the recovery in oil demand will take three years. The international rating agency Fitch has downgraded the long-term forecast for oil prices of the benchmark Brent and WTI grades by almost 4%.
The volume of world oil reserves in immobilized tankers (fig. below), acting as storage facilities, increased by 7.3% in the week to September 4 – to 168.08 million barrels, which is 232% more than a year ago.
Gold
In September, gold was down 4.20% from $1973.7 to $1890.9. Our expectations for gold growth in the medium term remain.
COVID-19
WHO:
- The current pandemic caused by the new coronavirus is not the last – the world must prepare in advance for a new one;
- Vaccine results will be ready by the end of 2020;
- Projected increase in deaths due to COVID-19 in Europe in October and November.
Element ONE fund
In September, the Element ONE fund continued to build up defensive positions to reduce portfolio volatility in anticipation of the US elections, while the defensive part of the portfolio allowed it to outperform the market. Raison Asset Management in September was on the 3rd place on the independent rating of analysts invest-idei.ru. The fund’s shares fell 3.46% in August and are estimated at $1,687.85.