By Shamim Adam
Sept. 4 (Bloomberg) -- Policy makers in Southeast Asia’s biggest economies may begin to remove monetary stimulus in their financial systems as early as the second quarter of 2010 as growth resumes, according to UBG AG. Singapore may shift its currency stance to one that allows for a modest and gradual appreciation of its exchange rate, while Thailand, Indonesia and the Philippines may start raising interest rates in the quarter ending June, UBS economist Edward Teather wrote in a report published yesterday. Malaysia will raise rates by 50 basis points next year, Credit Suisse predicts.
Central banks across Asia have started to signal they may soon need to raise borrowing costs as stimulus spending worth more than $950 billion revitalizes economies and threatens to stoke consumer prices. Credit Suisse yesterday raised its growth forecast for some Asian nations including Singapore and Thailand. “Discretionary monetary policy easing in Southeast Asia appears to be at an end,” Teather wrote. “Our forecast removal of policy stimulus is driven by an expected improvement in GDP growth, credit growth and inflation. Because of the shocks each economy has received in the last 18 months, any removal of stimulus will be both cautious and tentative and likely to be halted if growth moderates.”
Indonesia’s central bank yesterday refrained from cutting its benchmark rate for the first time in 10 months, judging faster inflation is now a bigger risk than slowing growth.
‘Earlier’ Tightening
“We conclude that Bank Indonesia has good reason to keep policy rates on hold until at least year end,” Teather said. “In 2010, we expect the reacceleration in inflation already underway will be very clear, and with it, inflation expectations. Monetary loosening in terms of lower interbank rates should continue, even with policy rates unchanged.” Bank Indonesia will probably raise rates 1.5 percentage points to 8 percent by the end of 2010, UBS and Credit Suisse said. Morgan Stanley, in a report today, said the risk of an “earlier policy tightening” is higher in Indonesia compared with other Asian economies.
Bank of Thailand Deputy Governor Atchana Waiquamdee said Aug. 31 it’s unlikely the central bank will cut rates further as the economy starts to recover from its first recession since the Asian financial crisis. Policy makers kept the rate unchanged at 1.25 percent last month for a third straight meeting after 2.5 percentage points of cuts between December to April. The Thai central bank may raise rates by 50 basis points in the second quarter before leaving borrowing costs unchanged for the rest of the year, Teather predicts. Credit Suisse expects the rate to be at 2.25 percent by the end of 2010.
De Facto Devaluation
The Monetary Authority of Singapore in April said it would adjust the trading range for the island’s dollar, a move economists said was a de facto devaluation of the currency. Singapore should return to a policy of allowing the currency to strengthen once the economy recovers from its deepest recession since independence in 1965, the International Monetary Fund said this week.
UBS foresees a “real possibility of a tightening move” by the central bank at its April review amid rising inflation expectations and credit growth, after earlier predicting no such move next year. Goldman Sachs Group Inc. yesterday said Singapore will allow more room for a stronger currency in 2010.
The Philippines will raise its benchmark rate to 4.5 percent in the second quarter of 2010 from 4 percent now, Teather said. Credit Suisse is predicting it will be at 5 percent by the end of next year.
Bangko Sentral ng Pilipinas reduced rates six times from December to July before keeping borrowing costs unchanged last month. The monetary policy stance “remains appropriate at this time,” Governor Amando Tetangco said today.
Bank Negara Malaysia will be the only one of the region’s five biggest economies to leave its monetary policy unchanged next year, UBS’ Teather predicts. Morgan Stanley and Credit Suisse economists are more bullish, with the latter expecting rates to be raised to 2.5 percent by end-2010 from 2 percent now.
Shamim Adam in Singapore at sadam2@bloomberg.net
Sunday, September 6, 2009
Equity Fund Outflows Surge, $4.29 Billion From U.S.
(Bloomberg) -- Investors withdrew a net $4.95 billion from equity funds and added $5.06 billion to bond funds in the week to Sept. 2, amid concerns about the strength of a world recovery, EPFR Global said in a report. “They struggled to make the connection between equity markets at 10 to 12 month highs and a global economy that has digested the bulk of the fiscal stimulus packages served up in recent months but continues to shed jobs,” wrote the EPFR, which tracks funds with $10 trillion worldwide. “Going into September they steered the cash they once again pulled out of Money Market Funds into fixed income rather than equity funds.”
U.S. equity funds incurred net outflows of $4.29 billion and emerging-market funds also saw withdrawals, EPFR said in an e-mailed statement. Emerging-market funds for equities in Asia excluding Japan received a net $67 million, while China funds got $200 million, the fund tracker reported.
China’s Shanghai Composite index tumbled 22 percent last month amid concern the government will tighten monetary policy to avert asset bubbles. It has since rebounded, rising 6.7 percent in the past three days. Premier Wen Jiabao said this week the government will maintain a moderately loose monetary policy. The MSCI World Index has fallen 2.7 percent this week, while the MSCI Asia Pacific Index lost 1.1 percent.
U.S. equity funds incurred net outflows of $4.29 billion and emerging-market funds also saw withdrawals, EPFR said in an e-mailed statement. Emerging-market funds for equities in Asia excluding Japan received a net $67 million, while China funds got $200 million, the fund tracker reported.
China’s Shanghai Composite index tumbled 22 percent last month amid concern the government will tighten monetary policy to avert asset bubbles. It has since rebounded, rising 6.7 percent in the past three days. Premier Wen Jiabao said this week the government will maintain a moderately loose monetary policy. The MSCI World Index has fallen 2.7 percent this week, while the MSCI Asia Pacific Index lost 1.1 percent.
The Commodity Market View
CNBC ASIA |
Gold Can Hit $1,500
Go long on gold as prices can rise to $1,300-1,500 over the next 6-12 months, said Scott Redler, chief strategic officer at T3Live.com.
Last December, the sharp jump in spot gold prices from $850 to $1,000 was the safe-haven play, Redler told CNBC. Since then, gold prices have consolidated in the upper-end of the range from $900 to about $970.
"In order for gold to really blast off and have the commodity-type parabolic move, it needs to turn into the inflation trade. With the world markets recovering and all the money that's been pumped into the system, people are starting to smell inflation."
And when inflation really kicks in, that could yield a move in gold to probably $1,300 to $1,500 an ounce over the next 6-12 months, said Redler. Keep your eyes on gold prices because if we blast through a $1,000 an ounce next week, there is a cycle in the precious metal that kicks in on September 9th which could result in another sharp price jump, according to Redler.
"We think the first breakout move will be a potent one and will definitely reward investors or traders that are ready and at that particular point. I think over time, gold will get to $1,300, $1,400, $1,500 an ounce. But that breakout trade is going to be very exciting and you need to be prepared for it."
Gold Can Hit $1,500
Go long on gold as prices can rise to $1,300-1,500 over the next 6-12 months, said Scott Redler, chief strategic officer at T3Live.com.
Last December, the sharp jump in spot gold prices from $850 to $1,000 was the safe-haven play, Redler told CNBC. Since then, gold prices have consolidated in the upper-end of the range from $900 to about $970.
"In order for gold to really blast off and have the commodity-type parabolic move, it needs to turn into the inflation trade. With the world markets recovering and all the money that's been pumped into the system, people are starting to smell inflation."
And when inflation really kicks in, that could yield a move in gold to probably $1,300 to $1,500 an ounce over the next 6-12 months, said Redler. Keep your eyes on gold prices because if we blast through a $1,000 an ounce next week, there is a cycle in the precious metal that kicks in on September 9th which could result in another sharp price jump, according to Redler.
"We think the first breakout move will be a potent one and will definitely reward investors or traders that are ready and at that particular point. I think over time, gold will get to $1,300, $1,400, $1,500 an ounce. But that breakout trade is going to be very exciting and you need to be prepared for it."
How and When Will the Global Crisis End?
CNBC.COM
I’m writing to you from Villa d’Este in Cernobbio, Italy, where I just finished moderating a panel at the annual Ambrosetti forum. Every year at this time, Ambrosetti holds a forum on the world, Europe and Italy. Since its beginnings in 1975, the forum has become widely regarded as one of the most important meetings worldwide. Prominent leaders from all walks of life discuss economic and social issues facing the world. The panel I was asked to moderate focused on world economic growth and was called “How and When Will the Crisis End,”
Many people here see continued weakness for the world economy. A majority of the audience of European business people said the recovery won't likely start until 2010, and almost 40 percent believe it won’t be until the second half of next year. The optimist of the group was University of Chicago Professor and Nobel laureate Gary Becker, who, though worried about inflation, declared "the recession is over" and believes the recovery won't be as lethargic as some others are saying.
He expects a slow recovery initially but says continued strong productivity will help the economy pick up steam and lead it out of the slump. He does not expect unemployment to reach the old peak of 10.8 percent reached in 1982.
The entire article is available here:
http://mobile.cnbc.com/inf/infomo?site=cnbcusa&view=us_newsd&feed:a=topstories&feed:c=topstories&feed:i=32702420&all=1
I’m writing to you from Villa d’Este in Cernobbio, Italy, where I just finished moderating a panel at the annual Ambrosetti forum. Every year at this time, Ambrosetti holds a forum on the world, Europe and Italy. Since its beginnings in 1975, the forum has become widely regarded as one of the most important meetings worldwide. Prominent leaders from all walks of life discuss economic and social issues facing the world. The panel I was asked to moderate focused on world economic growth and was called “How and When Will the Crisis End,”
Many people here see continued weakness for the world economy. A majority of the audience of European business people said the recovery won't likely start until 2010, and almost 40 percent believe it won’t be until the second half of next year. The optimist of the group was University of Chicago Professor and Nobel laureate Gary Becker, who, though worried about inflation, declared "the recession is over" and believes the recovery won't be as lethargic as some others are saying.
He expects a slow recovery initially but says continued strong productivity will help the economy pick up steam and lead it out of the slump. He does not expect unemployment to reach the old peak of 10.8 percent reached in 1982.
The entire article is available here:
http://mobile.cnbc.com/inf/infomo?site=cnbcusa&view=us_newsd&feed:a=topstories&feed:c=topstories&feed:i=32702420&all=1
New Exotic Investments Are Emerging on Wall Street
THE NEW YORK TIMES
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one. The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
The entire article is here:
http://mobile.cnbc.com/inf/infomo?site=cnbcusa&view=us_newsd&feed:a=topstories&feed:c=topstories&feed:i=32707038&all=1
After the mortgage business imploded last year, Wall Street investment banks began searching for another big idea to make money. They think they may have found one. The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.
The earlier the policyholder dies, the bigger the return though if people live longer than expected, investors could get poor returns or even lose money.
Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them. But some who have studied life settlements warn that insurers might have to raise premiums in the short term if they end up having to pay out more death claims than they had anticipated.
The entire article is here:
http://mobile.cnbc.com/inf/infomo?site=cnbcusa&view=us_newsd&feed:a=topstories&feed:c=topstories&feed:i=32707038&all=1
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