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from Breakingviews:
Malaysia poll offers only short-term relief
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Malaysia’s ruling coalition has narrowly survived a strong challenge to its 56-year-old rule. While the results of the country’s general election on May 5 came as a relief for investors, the poll showed a widening racial divide. That doesn’t portend well for the economy.
The ruling Barisan Nasional’s worst-ever electoral performance - the coalition claimed 133 out of 222 parliamentary seats - was good enough for investors who feared a regime change. The cost of insuring Malaysia’s sovereign debt against default fell to 75 basis points in early Asian trading on May 6, about 8 basis points lower than the pre-election level. Kuala Lumpur’s benchmark equity index jumped as much as 6.8 percent, and CLSA strategist Christopher Wood suggested investors increase their holdings of Malaysian stocks because the “immediate spectre” of political uncertainty has been removed. The ringgit strengthened against the U.S. dollar.
Yet while the opposition Pakatan Rakyat’s defeat eliminates the risk of policy reversals in the short run, the unhealthy polarization of the society along racial lines poses a longer-term threat. The fault lines were evident in the poll numbers, as the minority ethnic Chinese community, unhappy with state policies that discriminate in favour of the majority Malay Muslims in jobs, education and housing, all but deserted Barisan.
from Breakingviews:
Unsure voters could dim lure of Malaysian assets
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Malaysia’s upcoming general election looks set to be a close-run affair. The big risk for investors from the May 5 poll is that neither of the two competing coalitions - the ruling Barisan Nasional or the opposition Pakatan Rakyat - may be able to claim a decisive victory.
from Global Investing:
Asia’s credit explosion
Whatever is happening to all those Asian savers? Apparently they are turning into big time borrowers.
RBS contends in a note today that in a swathe of Asian countries (they exclude China and South Korea) bank deposits are not keeping pace with credit which has expanded in the past three years by up to 40 percent.
from Breakingviews:
Southeast Asia’s growth could lead to credit curbs
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Southeast Asia’s heady debt-fuelled growth is beginning to resemble the unsustainable mid-1990s boom. But authorities are shy to raise interest rates as doing so could attract more overseas capital, stoking inflation and financial instability. Direct curbs on credit and capital flows may prove more attractive.
from Global Investing:
Emerging Policy-Doves reign
Rate cuts are still coming thick and fast in emerging markets -- in some cases because of falling inflation and in others to deter the gush of speculative international capital.
Arguably the biggest event in emerging markets is tomorrow's Reserve Bank of India (RBI) meeting which is expected to yield an interest rate cut for the first time in nine months.
from Global Investing:
Emerging Policy-Hawkish Poland to join the doves
All eyes on Poland's central bank this week to see if it will finally join the monetary easing trend underway in emerging markets. Chances are it will, with analysts polled by Reuters unanimous in predicting a 25 basis point rate cut when the central bank meets on Wednesday. Data has been weak of late and signs are Poland will struggle even to achieve 2 percent GDP growth in 2013.
How far Polish rates will fall during this cycle is another matter altogether. Markets are betting on 100 basis points over the next 6 months but central bank board members will probably be cautious. Inflation is one reason along with the the danger of excessive zloty weakness that could hit holders of foreign currency mortgages. One source close the bank tells Reuters that 75 or even 50 bps would be appropriate, while another said:
from Global Investing:
Asian bonds may suffer most if QE on ice
Bonds issued in emerging market currencies have been red-hot favourites with investors this year, garnering returns of 8.3 percent so far in 2012. But for some the happy days are drawing to a close -- U.S. Treasury yields are nudging higher as the U.S. recovery gains a foothold and the Fed holds back from more money printing for now at least. That could spell trouble for emerging markets across the board (here's something I wrote on this subject recently) but, according to JP Morgan, it is Asian bond markets that may bear the brunt.
Their graphic details weekly flows to local bond funds as measured by EPFR Global (in million US$). As on cue, these flows have tended to spike whenever central banks have pumped in cash. (Click the graphic to enlarge.)
from MacroScope:
The thin line between love and hate
The opinion on Turkey’s unorthodox monetary policy mix is turning as rapidly as global growth forecasts are being revised down.
Earlier this month, its central bank was the object of much finger-wagging after it defied market fears over an overheating economy by cutting its policy rate. It defended the move, arguing that weaker global demand posed a greater risk than inflationary pressures.
from Russell Boyce:
Asia – A week in pictures 14 August 2011
This week Pakistan marked its day of independence from British rule with parades, parties, face painting and bombs. Two pictures of faces covered in colour, one paint, the other blood, seems to sum up all there needs to be said about the national pride Pakistan feels while facing so many challenges. Visually the complementary colours of green and red (colours on opposite sides of the colour spectrum) make the pictures jump out of the page especially when put side by side. The angry eye staring out of the face of green in Mohsin Raza's picture engages the viewer full on while in Amir Hussain's picture the man seems oblivious of his wound as blood covers his face, again more opposites, this time not in colour but mood. India too is preparing to celebrate its independence and Dehli-based photographer Parivartan Sharma's picture of festival preparations came to mind after I put together the red-and-green combination picture from Pakistan.
(top left) A man, with his face painted depicting the colours of the Pakistan national flag, attends a ceremony to mark the country's Independence Day at the Wagah border crossing with India on the outskirts of Lahore August 14, 2011. Pakistan gained independence from British rule in 1947. REUTERS/Mohsin Raza
from FaithWorld:
Malaysia sets up Vatican ties in gesture to Christian minority
(Pope Benedict receives a gift by Malaysia's Prime Minister Najib Razak (L) during a meeting at the Pope's summer residence in Castelgandolfo July 18, 2011/Osservatore Romano)
Malaysia and the Vatican agreed on Monday to establish diplomatic ties, a move seen by analysts as a bid by the Malaysian government to appease minority Christians in the mainly Muslim Southeast Asian country. Prime Minister Najib Razak is trying to mend the government's relations with Christians who make up about 9 percent of the country's 28 million after a rise in religious tensions ahead of general elections widely expected next year.
