Investment strategy Correspondent
Sujata's Feed
Jan 30, 2013

Chidambaram says too early to talk of FX war; welcomes RBI move

LONDON (Reuters) – It is too early to say that Japan’s aggressive recent moves to weaken the yen constitute a currency war but countries must resist falling into the trap of competitive devaluations, finance minister Palaniappan Chidambaram said.

Speaking to Reuters Television on Tuesday, Chidambaram said: “It’s still early to call this a currency war, only Japan has depreciated its currency, what choice does Japan have? They have to get growth up, they cannot continue with zero growth any longer.”

Jan 29, 2013

Chidambaram says too early to talk of FX war

LONDON (Reuters) – It is too early to say that Japan’s aggressive recent moves to weaken the yen constitute a currency war but countries must resist falling into the trap of competitive devaluations, finance minister Palaniappan Chidambaram said.

Speaking to Reuters Television on Tuesday, Chidambaram said: “It’s still early to call this a currency war, only Japan has depreciated its currency, what choice does Japan have? They have to get growth up, they cannot continue with zero growth any longer.”

Jan 29, 2013

India finmin says too early to talk of FX war

LONDON (Reuters) – It is too early to say that Japan’s aggressive recent moves to weaken the yen constitute a currency war but countries must resist falling into the trap of competitive devaluations, India’s finance minister said.

Speaking to Reuters Television on Tuesday, Palaniappan Chidambaram said: “It’s still early to call this a currency war, only Japan has depreciated its currency, what choice does Japan have? They have to get growth up, they cannot continue with zero growth any longer.”

Jan 28, 2013
via Global Investing

Emerging Policy-Doves reign

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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.

Jan 24, 2013
via Global Investing

Hyundai hits a roadbump

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The issue of the falling yen is focusing many minds these days, nowhere more than in South Korea where exporters of goods such as cars and electronics often compete closely with their Japanese counterparts. These companies got a powerful reminder today of the danger in which they stand — quarterly profits from Hyundai fell sharply in the last quarter of 2012.  (See here to read what we wrote about this topic last week)

Korea’s won currency has been strong against the dollar too, gaining 8 percent to the greenback last year. In the meantime the yen fell 16 percent against the dollar in 2012 and is expected to weaken further. Analysts at Morgan Stanley pointed out in a recent note that since June 2012, Korean stocks have underperformed Japan, corresponding to the yen’s 22 percent depreciation in this period. Their graphic below shows that the biggest underperformers were consumer discretionary stocks (a category which includes auto and electronics manufacturers). Incidentally, Hyundai along with Samsung, makes up a fifth of the Seoul market’s capitalisation.

Jan 23, 2013

Japan’s “Mrs Watanabe” to ride weak yen back to emerging markets

LONDON, Jan 23 (Reuters) – Japan’s brigade of mom-and-pop
investors, once connoisseurs of the most far-flung emerging
markets, look set to ride the newly weakening yen back to more
exotic climes again.

Assets of Japanese emerging market-dedicated investment
trusts, or “toshin”, have risen by more than $4 billion since
autumn, according to JPMorgan.

Jan 21, 2013
via Global Investing

Emerging policy-One cut, two steady

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What a varied bunch emerging markets have become. At last week’s monetary policy meetings, we saw one rate rise (Serbia) and differing messages from the rest. Mexico turned dovish while hitherto dovish Brazilian central bank finally mentioned the inflation problem. Russia meanwhile kept markets guessing, signalling it could either raise rates next month or cut them.

This week, a cut looks likely in Turkey while South Africa and the Philippines will almost certainly keep interest rates steady.

Jan 21, 2013

Development bank sees growth pick up in E.Europe and N.Africa

LONDON, Jan 21 (Reuters) – Economic growth in emerging
Europe and North Africa will pick up to 3.1 percent this year,
benefiting from an easing of the euro debt crisis, development
bank EBRD said on Monday.

Although slightly trimmed from earlier forecasts, the
prediction by the European Bank for Reconstruction and
Development is an improvement from last year’s 2.6 percent
growth rate for the region under its remit.

Jan 17, 2013
via Global Investing

Korean exporters’ yen nightmare (corrected)

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(corrects name of hedge fund in para 3 to Symphony Financial Partners)

Any doubt about the importance of a weaker yen in thawing the frozen Japanese economy will have been dispelled by the Nikkei’s surge to 32-month highs this week. Since early December, when it became clear an incoming Shinzo Abe administration would do its best to weaken the yen, the equity index has surged as the yen has fallen.

Those moves are giving sleepless nights to Japan’s neighbours who are watching their own currencies appreciate versus the yen. South Korean companies, in particular, from auto to electronics manufacturers, must be especially worried. They had a fine time in recent years  as the yen’s strength since 2008 allowed them to gain market share overseas. But since mid-2012, the won has appreciated 22 percent versus the yen.  In this period, MSCI Korea has lagged the performance of MSCI Japan by 20 percent. Check out the following graphic from my colleague Vincent Flasseur (@ReutersFlasseur)

Jan 16, 2013
via Global Investing

Brazil’s inflation problem

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When will Brazil’s central bank admit it has an inflation problem? Markets will be watching today’s rate-setting meeting for clues.

There is no doubt about the outcome of today’s meeting at the Banco Central do Brasil (BCB) — no one expects it to do anything but leave interest rates steady at the current 7.25 percent. But the BCB has been focused on growth for 18 months and has cut interest rates by 525 basis points in this time, its actions helping to drive the real 10 percent lower last year versus the dollar. The government meanwhile has unleashed huge doses of fiscal stimulus. The result, rather than a growth recovery, is a steady rise in inflation.