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Zawya
an hour ago
- Zawya
Currency FOMO may yet draw US investors overseas: Mike Dolan
(The opinions expressed here are those of the author, a columnist for Reuters.) LONDON - The dollar's drop this year has supercharged the outperformance of global equities over Wall Street, yet U.S. investors remain heavily underweight foreign stocks. Americans playing catch-up could well magnify the gulf in returns through the rest of 2025. Investment strategists have spent much of the past three disruptive months poring over blizzards of data on cross-border fund flows, largely to support the narrative that foreign capital is fleeing U.S. assets due to President Donald Trump's policy upheavals. As is often the case, the reality is more prosaic than the fearful hand-wringing. Morgan Stanley's recent dive, for example, showed ongoing foreign demand for U.S. equities, just at a slower pace following the April 2 tariff shock. If anything, they found U.S. investors were marginal net sellers of domestic equities. "The sheer size of the U.S. stock market means it should still receive inflows, just less of them," Morgan Stanley's team concluded. And now that U.S. stock benchmarks are back at record highs after a 20% round trip, the mood has turned somewhat. The thinking in some quarters at least is that - tariff fears notwithstanding - the storm has passed and Wall Street can rely on tax cuts, renewed tech enthusiasm and deregulation. But the stark outperformance by many non-U.S. markets so far this year could yet mean 'FOMO' - or fear of missing out - may now come into play for U.S. savers looking abroad - mirroring the global scramble to load up on Wall Street in recent years. At the very least, more significant and overdue rebalancing of U.S. investment portfolios may be in store. The dollar's 10% decline against major developed market currencies in the first half of 2025, and its 13% swoon against the euro in particular, is a key catalyst - potentially both driving and feeding off the investment switch. The MSCI all-country index that excludes U.S. stocks has climbed almost 17% this year, almost three times the 6% gain in the S&P500, flattered by currency gain on that index of more than 8%. In dollar terms, euro zone stocks have zoomed 27% higher so far this year, while Germany's DAX boomed by 37% and Hong Kong's index is up 20%. OVERSEAS FOMO David Kelly, Chief Global Strategist at JPMorgan Asset Management, makes the point that after years of exceptional U.S. stock gains, most investors are still heavily underweight non-U.S. assets. The prospect of further dollar weakness from here could well draw them out. "Even if it were an even bet whether the dollar and the exceptionalism premium would rise or fall going forward, investors are not positioned as if it were an even bet," Kelly wrote this week. "Prudence suggests they should spread their bets." Morningstar strategist Amy Arnott noted how imbalanced a U.S. investors' portfolio holdings could now be simply as a result of inertia during years of massive U.S. gains. An investor who started out five years ago with a portfolio mix of about two-thirds U.S. stocks and one-third international, and never rebalanced, would now hold about 71% of their portfolio in U.S. stocks, she reckoned. The most recent fund flow data showed assets in international funds totalled about $4.6 trillion, about 26% of the total in all U.S. active and exchange traded funds. Arnott points out that a more balanced market cap-based weighting would put 37.7% in international stocks. The argument for rebalancing is compounded by the much cheaper valuations available outside the U.S. and risk of exposure to the dollar. "It's impossible to know if international stocks will lead or lag over any given period, but a healthy dose of international exposure can help insure you're not overly exposed to trends in the U.S. market," the Morningstar strategist wrote. Of course, any move to rebalance now comes with numerous warnings about chasing overseas returns based on recent performance. How will the relative economies perform, and how will interest rates shift? How will the trade war pan out? What about sectoral biases and tech? What's more, there's also some debate about whether the fraught global policy environment will just result in the return of home bias, much as Trump's economic team would seem to favor. If that were the case, this trend may benefit Europe if the trillions the continent's savers have currently parked in the U.S. were repatriated - although it would also see U.S. investors just hunker down at home. The decider may well be further dollar weakness - also assumed to be a welcome development by the Trump administration. Global fund managers are already registering their most underweight position in dollars in 20 years, according to the most recent Bank of America survey, so perhaps the flight from the greenback is partly played out. But if dollar weakness resumes and snowballs - which could be the case as U.S. interest rates tumble and trade and fiscal deficits yawn wider - U.S. investors may find it impossible to ignore the lure of foreign shores. The opinions expressed here are those of the author, a columnist for Reuters
Zawya
an hour ago
- Zawya
US rare earth pricing system is poised to challenge China's dominance
LONDON - U.S. efforts to break China's dominance of the rare earths market and to drive investment in its own industry have moved up a gear with a Washington-backed plan to create a separate, higher pricing system. The West has struggled to weaken China's grip on 90% of the supply of rare earths, in part because low prices set in China have removed the incentive for investment elsewhere. Miners in the West have long called for a separate pricing system to help them compete in supplying the rare earths group of 17 metals needed to make super-strong magnets of strategic importance. They are used in military applications such as drone and fighter jets, as well as to power motors in EVs and wind turbines. Under a deal made public last week, the U.S. Department of Defense will guarantee a minimum price for its sole domestic rare earth miner MP Materials, at nearly twice the current market level. Las Vegas-based MP already produces mined and processed rare earths and said it expects to start commercial magnet production at its Texas facility around the end of this year. Analysts say the pricing deal, which takes effect immediately, should have global implications - positive for producers, but may increase costs for consumers, such as automakers and in turn their customers. "This benchmark is now a new centre of gravity in the industry that will pull prices up," said Ryan Castilloux, managing director of consultancy Adamas Intelligence. The DoD will pay MP the difference between $110 per kilogram for the two most-popular rare earths and the market price, currently set by China, but if the price rises above $110, the DoD will get 30% of additional profits. Castilloux said other indirect beneficiaries of the pricing system may include companies, such as Belgian chemicals group Solvay, which launched an expansion in April. "It will give Solvay and others the impetus to command a similar price level. It will give them a floor to stand on, you could say," Castilloux added. While Solvay declined to comment, other rare earth miners, developers and their shareholders welcomed the news. Aclara Resources is developing rare earths mines in Chile and Brazil, as well as planning a separation plant in the United States. Alvaro Castellon, the company's strategy and development manager, told Reuters the deal added "new strategic paths" for the company. MP'S GRADUAL OUTPUT INCREASE MP Materials, which suffered a net loss of $65.4 million last year largely because of China's low pricing, will build up magnet production at its Texas plant initially to 1,000 metric tons a year, later expanding to 3,000 tons a year. Under last Thursday's deal, the DoD will become its largest shareholder with a 15% stake and MP will construct a second rare earth magnet manufacturing facility in the U.S., eventually adding 7,000 tons per year. In total, production would be 10,000 tons a year - equalling U.S. consumption of magnets in 2024. That does not include, however, the 30,000 tons imported by the United States already installed in assembled products, Adamas consultancy said. It predicts global demand for rare earth permanent magnets will more than double over the next decade to about 607,000 tons, with the U.S. seeing the strongest percentage annual growth rate in coming years at 17%. The world's reliance upon China for much of this demand was brought into focus by China's curbs on its exports as trade negotiations continue between the United States and China. So far Western governments have had little success in trying to help their own industries to compete. Attempts to agree stronger pricing have been confined to piecemeal deals that set premiums for magnets. Dominic Raab, a former deputy prime minister and former foreign secretary for the United Kingdom, said he was not surprised the Trump administration had concluded that tax breaks alone would not create the level of investment required. "The next step is, can they scale it up?" asked Raab, now head of global affairs at Appian Capital Advisory, a private equity firm that invests in mining projects. The $110 level for neodymium and praseodymium, or NdPr, guaranteed by the DoD is slightly above a $75-to-$105 per kg range that consultancy Project Blue reckons would be needed to support enough production to meet demand in coming years. It compares to a current level of about $63. David Merriman of Project Blue said it was unclear how commercial industrial consumers would respond to higher prices and whether it would make them invest in rare earths as they have more diverse supply sources. "Major non-government backed consumers are less likely to follow this same investment pattern, however, as they are not so clearly aligned to a particular regional supply route," he said. A spokesperson for German auto giant Volkswagen declined to comment on pricing when asked about the DoD floor level but said: "We welcome all efforts to strengthen long-term stability and diversification in global supply chains for critical materials." (Reporting by Eric Onstad; additional reporting by Daina Beth Solomon in Santiago and Ernest Scheyder in Houston; Editing by Veronica Brown and Barbara Lewis)
Gulf Business
an hour ago
- Gulf Business
Kazakhstan launches first supercomputer in partnership with UAE's Presight
Image: Supplied Kazakhstan has unveiled its first national supercomputer in a strategic partnership with UAE-based Presight, marking a milestone in the country's digital transformation agenda. The launch event, attended by President Kassym-Jomart Tokayev and top government and technology leaders, was developed by the Ministry of Digital Development, Innovation and Aerospace Industry, in collaboration with Presight, a subsidiary of Abu Dhabi's G42. The supercomputer to support Kazakhstan's AI and research ecosystem Designed to support large-scale AI innovation, national data security, and cross-border cooperation, the supercomputer will serve as the technological backbone of Kazakhstan's AI and research ecosystem. It will enable advanced research, model training, and digital infrastructure across Central Asia and beyond, reinforcing Kazakhstan's ambition to become a regional hub for AI and cloud computing. Magzhan Kenesbai, chief growth officer, and Maxat Koshumbayev, country manager for Kazakhstan, represented Presight at the launch. Kenesbai, while presenting to President Tokayev, said Kazakhstan has the foundational elements to emerge as a global leader in AI. ' Kenesbai also briefed President Tokayev on Presight's global initiatives, including the Presight Kazakhstan has over 50 specialists The project includes construction of a data centre and command center at and deployment of an AI analytics system. Over 60 per cent of suppliers are local, and Presight Kazakhstan now employs more than 50 specialists. The announcement signals
