Frank Schwarz (MainFirst ) | Any investor approaching the subject of ETFs cannot ignore the MSCI World index. It is not only because of its high profile that this index makes its way into many portfolios seeking broad diversification. But how much diversification does the MSCI World really offer? Presented as a globally distributed investment with some 1,600 companies, around 65% of its weight is accounted for by the US,…
Trinh Nguyen (Natixis) | After the Philippines reported a shocking decline of GDP of -16.5% YoY, Malaysia topped it off with GDP falling by -17.1% YoY. The deterioration is in line with other Southeast Asian economic weakness -Singapore fell -13.2% and Indonesia -5.3%, much worse than during the Great Financial Crisis (Vietnam is the only that has positive Q2 GDP growth in ASEAN). While some of it is due to external demand decline, the severity of economic contraction is self-imposed via suppression measures that crushed domestic economic activity.
Trinh D. Nguyen (Natixis) | Here comes the good news: emerging Asia is turning the corner and on its upward trajectory in terms of growth in H2 2020. But increasingly, the pace of recovery from the trough is much slower for some and faster for others, creating widening divergence in emerging Asia. China, Vietnam, Malaysia, and the Philippines to a lesser extent, have shown a rapid rebound from their trough, based on the latest June manufacturing data. Other indicators such as retail sales also confirm this. That said, Indonesia and India are still struggling as the recovery is more sluggish and in contractionary territory. Singapore and Thailand are also lagging but have more buffers to offset drag.
Wei Wei, a 40-year-old Chinese national, was executed on Thursday morning at Fukuoka Prison. He had been convicted of the murder of a family of four in Fukuoka, committed with two other students of Chinese origin. Japan is one of a handful of countries that has persistently executed over the past few years.
After several sluggish years by their own standards, the emerging economies’ growth rates have once again started to speed up. As seen by Caixabank’s strategists, “the first hesitant signs of this turnaround could be seen in 2016, becoming much more evident in 2017. Emerging growth rates are now expected to consolidate at around 5% over the next few years.”
This month is the 20th anniversary of the start of the Asian Financial Crisis. Over these two decades, Asian economies have changed a lot: in 1997, Chinese GDP was around $780bn, about the same size as Switzerland. Last year, the Chinese economy grew by more than that amount.
Assuming that Trump’s getting US presidency has turned global establishment upside down, markets are under currents of diverging US, but not leaving aside domestic factors. In the case of Asian, on one hand, the likelihood of stronger US data leading to higher USD rates is pulling Asia rates higher, as reported by BoAML. On the other hand, flush local liquidity conditions, lackluster pick up in domestic demand and easing stance of Asian central banks are pushing Asian rates lower.
Mark McFarland (UBP) | Brexit has had a cathartic effect which is likely to continue for a long time. Although Asia as a whole does not have very close links to the UK, the Asian markets are very sensitive to global growth, investment flows and interest rates in US dollars. What happens next in Europe will be crucial for Asia in the next few months.
UBS | Non-Japan Asian private debt is now the highest in the world for any major region and is climbing toward 170% of GDP. As we have argued in our Debtopia thesis since 2013, rising leverage will increasingly result in diminishing marginal benefits to economies and profits when debt becomes excessive.
In the Asia Times there is an article about the tricks China has begun to use to conceal the truth about its foreign currency position. Up until December, China released the two figures corresponding to foreign currency reserves, that of the Central Bank and that of the banking sector (which let’s not forget is state-owned).