China’s FV policy in a tough balancing act

From

An ongoing liberalization of China’s currency and capital account is under threat as the renminbi falls, capital outflows intensify and foreign reserves dwindle. Forging ahead with the reform and taking a pause to let the market settle down both have their pros and cons. Our base-case scenario is that Beijing will continue to walk a

continue reading

Benign inflation to keep Asian central banks focused on growth risks

From

Concerns that food and oil prices may soon reverse their downtrend, potentially derailing a nascent monetary easing cycle in Asia, are likely overdone. Central banks, in our view, are likely to remain focused on the downside risks to growth, given the slackening domestic demand and sluggish exports. Persistent disinflation due to lower oil and food

continue reading

Has Indonesia turned the corner?

From

The recent stabilisation in Indonesia’s currency and bond markets, together with subdued inflation and a healthy trade surplus, is paving the way for monetary easing. Moreover, a pickup in infrastructure spending bodes well for productivity growth, adding to the positive momentum. The return of risk appetite in global markets and a resultant rebound and stabilization

continue reading

Asia: Sound fundamentals suggest no repeat 1997–1998 crisis

From

While Asian currencies have been quite unstable in recent months, comparisons with the Asian Financial Crisis are over the top, in our view. External positions of the region’s economies are in a much healthier state today. A big problem, however, is that global export demand has remained sluggish for so long, depriving the currencies of a key source of strength.

continue reading

Asian frontier economies face refinancing risks

From

Asian frontier-market economies need to refinance a significant amount of external liabilities over the coming year. Their sovereign fundamentals are not too concerning, but the timing isn’t ideal, given the risk-averse market environment and potential political noises. Investors should closely monitor these risks in order to fully capture the opportunities that the new bond issuances

continue reading

China after the market intervention: What’s next?

From

China’s efforts to stem the market crash have had limited success so far. In our view, attempts to boost domestic demand via the policy banks will only help prevent further economic damage, while a rebound in exports is also unlikely. However, we believe a nascent recovery in the housing market could provide a more effective

continue reading

Malaysia: capital controls to support ringgit would be disruptive

From

China’s surprise currency devaluation, which triggered a sell-off in many Asian currencies, has increased Malaysia’s headache as the country had already been struggling to halt the ringgit’s decline. Reintroducing capital controls to support the currency—as some in the market expect—would be counterproductive, but we believe that investors should be vigilant about such a tail risk.

continue reading

China’s currency devaluation increases certainty

From

China’s surprise currency devaluation sparked a debate on whether it was part of the country’s ongoing financial reform or a measure to boost flagging exports. The plot thickens, as the flexibility now given to the currency is, ironically, forcing the authorities to step up their intervention, at least for now. It will take some time

continue reading

Indonesia’s fiscal performance set to improve

From

Indonesia’s decision to scrap domestic fuel subsidies and use the savings for needy infrastructure projects marks a big step forward for the country’s fiscal health. It not only lessens the burden of doling out subsidies, but represents a better allocation of resources, which should help to strengthen the economy. The decline in oil prices over

continue reading

Despite uncertainty and volatility, China’s reforms could trigger six world-shaking changes, says AB

From

One of the biggest risks facing investors concerned about weak growth and market volatility in China is that they could be underestimating the country’s upside potential, research by global asset manager AllianceBernstein (AB) suggests. “Global investors have been understandably transfixed by the recent gyrations in China’s equity markets,” said the authors of the firm’s latest

continue reading