Financial system can still knock economies off course 5 Sep 2013 Remember 2007, when the halcyon days of Great Moderation were meant to last forever? Finance got in the way. Until recently, most thought emerging economies would grow fast for years too. Finance broke that dream. It could now undermine the nascent recovery in rich countries.
Euro’s shrinking FX market share is a puzzle 5 Sep 2013 It’s no surprise that daily currency turnover has hit a record high again, now topping $5 trillion. But it’s harder to explain why the euro’s share of the market has touched a record low. The reasons will matter to banks allocating resources within their FX businesses.
Not all Asian countries need to fear the Fed 5 Sep 2013 Plunging currencies have raised contagion concerns. But not all nations are equally vulnerable to receding tides of dollar liquidity. A Breakingviews interactive map shows that while no Asian economy is entirely immune, none is as badly exposed as India.
Rajan’s call to diaspora can’t stem rupee rout 5 Sep 2013 India’s new monetary czar can lure some funds from overseas Indians with a cheap dollar-rupee swap. The clever and relatively cheap ploy may buy some time, but the former IMF chief economist will only succeed as a central banker if he can break the country’s painful stagflation.
Emerging economies need to change to compete 5 Sep 2013 -The World Economic Forum’s annual competitiveness rankings hold little succour for some countries that are feeling market pressure. Brazil and India are deteriorating, Venezuela and Argentina plunging. Some Asian countries fare better but reforms are vital almost everywhere.
China’s bad debt could leave $500 bln equity hole 4 Sep 2013 That’s how much the biggest lenders would need if 10 percent of their loans go bad and balance sheets continue to expand, according to a Breakingviews calculator. Though earnings can cover some of the shortfall, the potential hit explains why valuations are languishing.
The lessons for China from Japan’s lost decade 3 Sep 2013 China faces many of the challenges that hobbled its Asian rival in the late 1980s: a debt-fuelled property boom, less competitive exports, and an ageing society. China is still urbanising and can avoid deflation, but only if it learns from Tokyo’s error by cleaning up its banks.
Minzhong reprieve doesn’t dispel short-seller risk 3 Sep 2013 A bid from the Chinese food group’s largest shareholder has neutralised questions about the company’s accounts. It’s a reminder of the risks for short-sellers going after Asian targets. But the ongoing slide at commodities trader Olam shows concerns aren’t easily dismissed.
Emerging market currency rescue is a pipe dream 2 Sep 2013 India’s idea of group-selling dollars to prop up emerging market exchange rates would be a tough sell. Participants would be asked to spend their reserves to help others, and probably lose money in the process. The best thing India can do is to revive sputtering growth.
Emerging consumers may leave West’s shares wanting 2 Sep 2013 Developing economies were losing steam even before some began hiking rates to try to win back market confidence. The shifts will hobble Western companies whose earnings have been turbo-charged by Asian and Latin American consumers living off cheap credit.
China graft purge needs carrot as well as stick 2 Sep 2013 A probe into the head of the state asset regulator suggests even the mighty can’t escape the law. Fear is a powerful tool for fighting high-level corruption. But unless China also cuts opportunities and incentives for graft such cases amount to little more than score-settling.
Xiaomi can’t afford to let its hype go to waste 30 Aug 2013 The Chinese smartphone maker, which just poached a top Google exec, has ballooned in value to $10 billion in just three years. Based on current sales, that isn’t a stretch. But scale brings risk: Xiaomi needs a “moat” if it is to become China’s Apple, and not its Palm Inc.
China growth index: Good month for train-spotters 30 Aug 2013 Breakingviews’ forward guide to China’s economy has picked up, including rail freight volumes, an important sign of domestic demand. Summer’s PMI readings also improved. But most of the alternative growth indicators remain negative. Things are far from full steam ahead.
Currency market’s rude wakeup call stirs Indonesia 29 Aug 2013 The collapsing rupiah has finally forced the country’s central bank to raise interest rates. It’s a step Jakarta should have taken much earlier. High inflation and a widening trade deficit have shown the country’s loose monetary policy for what it is: a risky growth obsession.
China’s consumers aren’t living up to sales pitch 28 Aug 2013 Purchases of almost everything have slowed sharply; some retailers are struggling to pay back debts. The most likely culprit is decelerating investment, which drags on incomes. China’s consumers will have their day, but the idea they alone can sustain growth looks threadbare.
China’s debt molehills could turn into mountains 27 Aug 2013 Banks have reported low overall bad debt levels. But locally, risks are mounting. The east coast and retail sector are two areas where credit conditions are getting worse. In China, regional problems can escalate rapidly, and investors have poor visibility over where risks lie.
Asia sell-off will expose weak corporate defences 26 Aug 2013 Market turbulence invites comparisons with Asia’s last financial crisis. Though most economies are in better shape this time, corporate leverage has risen. Higher interest rates, slower growth, and falling currencies will lay bare companies that failed to learn past lessons.
China can learn from Russia on political martyrs 26 Aug 2013 The trial of Bo Xilai echoes that of Mikhail Khodorkovsky eight years ago. Like the jailed Russian oligarch, Bo could some day become a symbol for the regime’s failings. The difference: China’s leaders have a chance to keep their prosperity promises. Fail, and Bo may come back.
Nepotism is giving way to elite breeding 26 Aug 2013 JPMorgan’s family-related hiring in China is under investigation. Though the old practice of automatic jobs for the kids of the elite is on the decline globally, the young rich profit from privileged upbringings. The new nepotism is fairer, and more troubling, than the old.
Fed liquidity curbs will act as Asia’s detox plan 22 Aug 2013 Asia’s sliding trade surpluses were making it increasingly reliant on cheap foreign debt. Higher U.S. interest rates will cure the craving. Though markets may be turbulent, costlier local money or cheaper currencies will improve the trade balance for most countries in the region.