Far East Capital Newsletter
QT replaces QE in financial markets
11 Jun 2022

In This Issue

QT replaces QE in financial markets

Continued selling dominates the markets with scant attention being paid to fundamentals at present. The future it too uncertain for there to be a reversal of recent bearish trends with intermittent rallies being the only respite. While interest rate sensitive industrial stocks will adjust lower as interest rate rise, the negative sentiment will permeate all sectors for the foreseeable future, with the exception of conventional energy stocks. Get used to it.

Quantitative Easing (QE) has long been the tool by which economic and market liquidity have been bolstered whenever there have been ructions in the market. The US Fed bought $3.3 trillion in Treasuries and $1.3 trillion in mortgage-backed securities over the past decade and the equity markets have been major beneficiaries of this strategy. Economists initially warned of the inflationary effects of such huge injections of liquidity, but those warnings were gradually silenced as the expected wave of inflation never materialised ... until now.

The Australian listing came about with an IPO in September 2021, that raised $10m at 20c a share. Unfortunately it was an inauspicious start for Besra with the shares trending downwards from the first day of trading to hit a low of 3.8c in May 2022. There was a good rally to 10c over the subsequent two weeks, but the price has come off again with the rest of the market, in June. The obvious question is "Has it been treated too harshly by the market?"

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