Asian News

[Silverbird]

Eventually the Chinese Yuan will be a freely convertible currency if they are to maintain a huge trade surplus with the other countries. But, It will take time. They are slowing changing but at a slower pace. I do hope that the different classes of Chinese stocks disappear in the near future...

Silverbird, what do you think?

Well...the problem is China is holding on to over $1 trillion in dollar reserves, and the Party wants some control over the economy, so that they still have legitimacy. But they don't want to stop the growth either, or take out the bottom from their dollar house of cards. Slowly, they are buying up Euros (which gets the Europeans in a tizzy!) and buying up equities (and got toasted for it with anything "safe" that contained subprime loans). Pollution and other social problems are also a huge challenge for a Party that is supposed to exist for the sake of the people. The currency is one of the few things they still have control over. But in controlling it, they are playing a dangerous game that is getting very expensive to keep playing. The latest Party meeting does not indicate a radical change in the works - I expect currency control to continue. The G7 can grumble about the Yuan. But no one wants the bottom to drop out from under the dollar. China's stuck watching the stew they started, keeping it from boiling over is going to be quite a challenge.

 

[Ichiro]

DEEP FED RATE CUTS MEAN NO US RECESSION IN 2008
by Nadeem Walayat


December 11, 2007


The US Fed's reaction to date to the housing bust and US subprime mortgage credit crisis is by making deep cuts in US interest rates that today will see at least a further 0.25% cut bringing the rate down to 4.25%, off 1% from the 5.25% high just 3 months ago.

The US Fed is clearly in full blown panic mode, with the aim of the cuts to avert a potentially deep US recession.



The US Fed will continue cutting interest rates during 2008, regardless of the consequences to the US dollar and inflation (which has a little further to rise going into 2008). The cuts are ensured by the worst housing market conditions since the great depression which is a harbinger of a deep recession unless emergency preventative action is taken now. Therefore the primary observable goals of the interest rate cuts are to:



Can the US Fed Avert a Recession ?

The consensus commentary is clearly shifting in favour of a US recession during 2008. However apart from a recession in the housing sector and job losses expected in the financial sector. The stock market (Dow Jones) trading near its all time high seems to be suggesting that the worries are over stated.

The job losses expected are unlikely to result in a US recession, the housing market credit crunch will impact on growth but only to perhaps shaving 2% or so of GDP growth therefore 2008 looks set to achieve growth in the region of 1.5% to 3% and thus avoid a US Recession. Also, the falling dollar is already having a positive impact on exporters that looks set to continue to benefit from the on going dollar devaluation during 2008.

Implication for the Financial Markets

US Dollar - The dollar's bear market will persist during 2008, until signs emerge that the US housing market decline is coming to an end.

Global Stock markets - My expectation is that the worlds stock markets as measured by the main indices will rally strongly during 2008 on the premise that the US will avoid a recession as well as a consequence of the growth spiral. The global P/E ratio analysis of 18th Nov, suggested which markets looked more favourable in terms of price / earnings and growth prospects. Already the stock markets have rebounded strongly a midst an atmosphere of gloom and doom, analysis of the 12th of Nov, suggested an imminent low in advance of the resumption of the bull market into year end.

US Housing Market - As mentioned above, the rescue plans will ensure that the housing market will remain depressed for many years, much as Japan experienced during its bad debts crisis that was prolonged due to government intervention.

Financial Sector - Whilst the bad news and bad debt provisions is far from over, selective large banks with little exposure to the US housing mortgage market look good value, analysis of 19th Nov looked at several UK based banks that have since performed strongly.

In Summary

The US and much of the western world is going to go through a rough patch during 2008. The US in my opinion does look set to avoid a recession, and much of the funds that were flowing into the housing markets and now pouring into treasuries will seek higher returns elsewhere. Those higher returns look set to be found in the stock market as investors realise that the economic picture is not so bad, and that the stock market instead of falling as the growing consensus suggests, will continue to trend higher and attract more converts seeking higher returns.

http://www.[[financialsense.com/fsu/editorials/walayat/2007/1211.html

 

[Ichiro]

THE BAILOUT BEGINS IN EARNEST ITS EFFECT WILL BE MORE INFLATION
by Monty Guild
Guild Investment Management, Inc.
December 11, 2007

THE U.S. DOLLAR

As we predicted, the drumbeat of PR for the dollar has begun in earnest, and this was and is to be expected.

No governmental financial authority anywhere wants the dollar to fall in a straight line without any rallies and without any slowdown. Now an effort has begun to give the dollar a rally; and it has been successful so far. The battle to slow down the dollar decline will include:

*

Intervention by central banks to protect their dollar holdings.
*

Jawboning by central bankers and finance ministers in every country to try and give the dollar a further rally.

Long-term, we remain bearish on the U.S. dollar. We should however, remember that even the dollar can rally, and it occasionally does. It rallied for eleven months beginning in December 2004. Then it had a spectacular decline from late 2005 until quite recently.

THE CREDIT CRISIS - A BAIL OUT IS UNDERWAY

In the last two weeks there have been several capital injections into the weak banks and brokers.


ECONOMICS

Certainly, the U.S. economy is just beginning its profits recession. U.S. corporate profits will be down for at least two quarters, and for even longer in the housing and finance sectors.

Companies will also have to deal with CPA's being much more vigilant about making their clients write off submerged bad debts and accounting for unpriced, or mark to model investments. Therefore, it is an easy call to say that the recession in U.S. profits and U.S. GDP growth is just beginning. We can expect the news media in coming months to be full of negative news about corporate profits.

THE EASIEST SOLUTION TO SOLVING THE CURRENT PROBLEMS IN THE NEWS IS TO...CREATE MORE INFLATION

Most of the problems have to do with the bad debt clogging the U.S. financial system and contributing to a situation where credit is not available to some borrowers. This can have long-term economic consequences and should be cured as quickly as possible. The recent government intervention will not be a major part of the clean up.

For this reason, we are happy to see the sovereign wealth funds and hedge funds step up and buy heavily discounted assets at what they think are bargain prices. Will they be followed by other opportunistic investors?

http://www.financialsense.com/editorials/guild/2007/1211.html

 

[Ichiro]

AP-Dollar Falls Against Most Currencies

Wednesday December 12, 6:25 am ET

Dollar Sinks in Europe After Third Interest Rate Cut This Year by the US Federal Reserve

FRANKFURT, Germany (AP) -- The dollar fell against most currencies Wednesday following the third interest rate cut this year by the U.S. Federal Reserve.

The 13-nation euro bought $1.4687 in morning European trading, up from $1.4675 in New York late Tuesday. The British pound also rose to $2.0442 from $2.0356.

The dollar climbed to 111.16 Japanese yen from 110.82 yen.

The Fed on Tuesday cut its benchmark federal funds rate to 4.25 percent and signaled that more cuts were possible if a severe downturn in the housing market and a crisis in mortgage lending worsen.

The central bank also reduced its discount rate, the interest it charges to make direct loans to banks, by a quarter-point to 4.75 percent.

The cut was the third since September amid mortgage problems in the U.S. that have tripped up borrowers and caused a credit crisis among banks -- fueling wider fears about the health of the U.S. economy.

http://biz.yahoo.com/ap/071212/dollar.html?.v=1

 

[Ichiro]

Bank of America Cuts 2007 Yen Forecast on Outflows (Update1)

By Yumi Teso

Dec. 12 (Bloomberg) -- Bank of America N.A. lowered its forecast for the yen against the dollar on speculation Japanese investors will purchase higher-yielding assets overseas with their year-end bonuses.

The second-largest U.S. bank predicts the yen will end 2007 at 110 per dollar compared with a previous forecast of 108, according to a report published yesterday. Money flowing offshore may reduce the Japanese currency's 3.4 percent gain this quarter from 111.01 as of 3:28 p.m. in Tokyo.

Japan's key interest rate has stayed at 0.5 percent, the lowest among industrialized nations, since February, with futures contracts showing an increase is unlikely over the next 12 months. Winter bonus payments will average about $7,665 per person, the Nikkei newspaper said last month. At least 37 investment trusts that can be invested fully or partly in foreign assets will be launched between Dec. 14 and Dec. 27, Bank of America said.

``We see a capital outflow of as much as $7.2 billion or so in December, putting pressure on the yen'' to weaken, said Tomoko Fujii, a senior economist and strategist at Bank of America in Tokyo. ``Japanese investors don't have an attractive place to put money in Japan.''

Carry Trades

Japan's overnight lending rate is lower than the benchmark 8.25 percent rate in New Zealand and Australia's 6.75 percent, making the yen a favorite funding currency for so-called carry trades, where investors borrow money cheaply to put money into higher-yielding assets elsewhere. The Federal Reserve yesterday cut the target overnight lending rate between banks by a quarter-percentage point to 4.25 percent.


http://www.bloomberg.com/apps/news?pid=20601083&sid=aPkZ6VXtkr70&refer=currency

 

[Ichiro]

Asian Currencies: Won, Rupiah Fall as Fed Rate Cut Disappoints

By Yumi Teso and Aaron Pan

Dec. 12 (Bloomberg) -- South Korea's won and Indonesia's rupiah fell against the dollar on speculation the Federal Reserve's interest-rate cut yesterday was too small to avert a recession that will curb demand for Asian assets.

The won declined for a third day as Asian stock markets tumbled after the Fed lowered its benchmark rate by a quarter- point to 4.25 percent, disappointing some investors who expected a larger reduction. Sales of Korean stocks by overseas investors exceeded purchases today by the most since Nov. 22, according to stock exchange data.

``We're seeing a bit of a pullback in Asian currencies today with the dollar a touch higher,'' said Steven Chang, vice president for global markets at State Street Bank & Trust Co. in Hong Kong. ``In the near term, dollar-won will be driven by what's happening with interest rates.''

The won weakened 0.3 percent to 926.60 per dollar as of the 3 p.m. end of trading in Seoul, the weakest close since Nov. 29, according to Seoul Money Brokerage Services Ltd.

Indonesia's rupiah fell the most in three weeks as the Jakarta Composite Index of equities slid 0.7 percent.

``The rupiah will follow the regional stock market downtrend given the Fed decision,'' said Lindawati Susanto, head of currency trading at PT Bank Resona Perdania in Jakarta. ``It's a reflection of risk aversion here.''

The currency lost 0.4 percent to 9,305 per dollar, according to data compiled by Bloomberg. The decline was the biggest since Nov. 21 when crude oil prices rose to a record $99.29 a barrel.

http://www.bloomberg.com/apps/news?pid=20601083&sid=acqhLDiLqiIU&refer=currency

 

[Ichiro]

Asian Currencies Weaken as U.S. Dollar Gains on Rate Outlook

By Yumi Teso

Dec. 17 (Bloomberg) -- Asian currencies led by the Singapore dollar fell against the U.S. dollar on concern accelerating inflation will give the Federal Reserve less room to cut interest rates next year.

The Singapore dollar was the biggest loser among the 10 most active currencies in Asia outside Japan as traders reduced bets the Fed will lower interest rates. U.S. 10-year government bonds yielded 1.45 percentage points more than the similar- maturity Singapore debt, compared with 1.33 points a week ago.

``It's a rebound in the U.S. dollar after stronger than expected data,'' said Norifumi Yoshida, vice president of the trading section at Mizuho Corporate Bank Ltd. in Singapore. ``From the interest-rate perspective, the dollar has drawn some support across the board.''

The Singapore dollar dropped 0.7 percent against the U.S. currency to S$1.4534 as of 11:30 a.m. local time, the biggest slide since Aug. 16, according to data compiled by Bloomberg. The currency may reach as low as S$1.4570 this week, Yoshida said.

Interest-rate futures on the Chicago Board of Trade show 80 percent odds policy makers will lower the target overnight lending rate between banks a quarter-point to 4 percent in January, compared with 96 percent chances a week ago.

Malaysia's ringgit also depreciated. The currency halted a four-week rally to the strongest in more than a decade as Asian stocks slid. Traders reduced bets the Fed will cut its key rate in January after U.S. consumer prices rose last month by the most since September 2005 on record energy costs.

Stock Sales

``The U.S. cannot afford to be too aggressive in rate cuts in the face of inflation risks,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``Funds may pull out of Asian markets and the dollar will get some support.''

http://www.bloomberg.com/apps/news?pid=20601083&sid=aBVwZyCkHWbg&refer=currency

 

[Ichiro]

Asian Stocks Fall for Fourth Day; BHP Billiton, HSBC Lead Drop

(((BAD news---first it was the sub prime mess and now its inflation....))))
By Hanny Wan and Chan Tien Hin
Enlarge Image/Details

Dec. 17 (Bloomberg) -- Asian stocks fell for a fourth day, led by BHP Billiton Ltd. and HSBC Holdings Plc, on concern accelerating inflation will derail global growth and limit further interest-rate cuts.

BHP dropped the most in six weeks after halting a planned share buyback. HSBC and Cheung Kong (Holdings) Ltd. paced losses in Hong Kong, where interest rates track those set by the Federal Reserve, after U.S. consumer prices rose the most since 2005. Centro Properties Group plummeted 76 percent in Sydney after the owner of U.S. shopping malls said it was struggling to pay debt.

``Sentiment in the region is getting worse,'' said David Ng, who helps manage $954 million at Hwang-DBS Asset Management Sdn. in Kuala Lumpur. ``First we had slowing U.S. growth; now add on inflation fears. That makes for a bad combination.''

The MSCI Asia Pacific Index lost 2.1 percent to 153.44 as of 2:18 p.m. in Tokyo, extending a three-day, 5.1 percent drop. Nine of the index's 10 industry groups dropped. The measure is set for its lowest annual gain in five years.

Australia's S&P/ASX 200 index declined 3.5 percent, the biggest drop among Asia's benchmarks. Japan's Nikkei 225 Stock Average fell 1.5 percent to 15,289.40. Mitsubishi UFJ Financial Group Inc. led banks lower after a research report by Nomura Holdings Inc. said the country's three largest lenders were being asked to contribute too much to a subprime-asset bailout fund.

Accelerating Inflation

The Standard & Poor's 500 Index fell 1.4 percent on Dec. 14 after a report showed U.S. consumer prices increased 0.8 percent in November, faster than forecast and the highest pace since September 2005. European inflation accelerated last month to 3.1 percent, the fastest pace since May 2001.

http://www.bloomberg.com/apps/news?pid=20601084&sid=arvP1tw1BMjM&refer=stocks

 

[Fivetears]

Asian stocks dive anew on U.S. recession fears
Asian stocks tumbled anew on Friday after the latest salvo of sour signals about the U.S. economy pummeled Wall Street, sending the benchmark S&P 500 sprawling 3 percent lower to a 15-month nadir. Fears about a possible recession in the United States, Asia's biggest export market, also sent government bond surging to multi-year highs and pushed U.S. crude oil prices below $90 a barrel. The dollar struggled near a 2- year low against the yen after U.S. Federal Reserve Chairman Ben Bernanke told lawmakers that more interest rate cuts may be needed to counter a worsening economic outlook.
http://news.yahoo.com/s/nm/20080118/bs_nm/markets_global_dc_1;_ylt=AlAj.VU0E3kqvpoyN3wtniME1vAI

 

[Foghorn]

Re: Nikkei News

The Nikkei is rallying hard to get into the green. Lets see if Japan can make it and keep it green. Then it will be up to the FTSE to see if it too can rally or open in the green.

Lets see what happens tomorrow in the USMs.

Foghorn

TOKYO, Jan 18 (Reuters) - Japan's Nikkei average turned positive in afternoon trade on Friday, lifted by expectations for measures by President George W. Bush to boost the flagging U.S. economy.
The dollar's gain against the yen also helped exporters to pare earlier losses.

From:
http://www.reuters.com/article/marketsNews/idCATFA00294820080118?rpc=44