Sunday, 26 September 2010

Debase Jumping...

No it is not that all doom and gloom. There are still some bright spots in the World Economy.

While the US and the UK are busy debasing their currencies to revive their exports, Asian currencies are booming and their currencies are surging ahead. While European countries and the US are struggling to power ahead given their respective stricken economics, the Asian story is impressive.

“The economic growth story has spurred fund inflows into Asia,” said Yuji Kameoka, a Tokyo-based senior economist at the Daiwa Institute of Research. “That adds to the appreciation pressure for Asian currencies.”

Marc Faber : I think that the Yuan will continue to appreciate against the US Dollar along with the other Asian currencies because China with its large reserve can basically force the other currencies in Asia also upwards by buying them , I do not think that China is terribly concerned by say ten or twenty percent appreciation of the Yuan against the US dollar but what I do not like is to be pushed around by someone like Mister Obama ......well basically we are in an Olympic game in the world to depreciate currencies we do not have trade wars like in the thirties when you have import restrictions and essentially trade barriers , but countries , in my opinion a mistake they try to remain competitive by having a low currency , and so everybody in the world try to lower the value of its currency ....i think the Asian currencies including the Chinese Yuan will continue to appreciate , this year the Malaysian Ringgit is up ten percent the Thai Baht is up almost nine percent and the stock markets of Malaysia Thailand Philippines Indonesia are all up in US dollar terms between fifteen and thirty five percent ..., I think we live in a new world in which emerging economies will have a larger and larger share of wealth , stock market capitalization it doubled in the last ten years already and stands now at twenty two percent of global market capitalization , I think in ten years time emerging economies could be fifty percent of the global stock market capitalization ....etc....
Sept. 24 (Bloomberg) -- Marc Faber, publisher of the Gloom, Boom & Doom report, discusses the outlook for the Chinese yuan. Faber, speaking from Chiang Mai, Thailand, with Deirdre Bolton on Bloomberg Television's "InsideTrack," also discusses gold prices and expectations for the Standard & Poor's 500 Index.

I agree with Marc Faber, and so would have agreed Angus Maddison, author of Contours of the World Economy 1-2030 AD (great book!).

I previously focused on long term macro trends.
I previously posted on the 1st of May that in this environment Asian Currencies would do very well:

"In terms of macro investments, Asian currencies will rise against the Euro, USD and GBP. Fixed Income Emerging Markets funds will do very well in this new environment given their lower probability of defaults depending on the country they are exposed to (South Korea, Singapore, Taiwan, Maylasia, Indonesia are attractive)."

"The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, climbed to a two-year high. The Philippine peso gained 0.3 percent to 44.055 per dollar and India’s rupee was up 0.4 percent at 45.65 as of 2:53 p.m. in Mumbai. China’s yuan climbed 0.1 percent to 6.7121 and reached 6.7085, its strongest since official and market exchange rates were unified at the end of 1993."

And it is only the beginning for Asian currencies due to the debasing game being played in the West.

"South Korea’s gross domestic product grew 1.4 percent in the three months through June from the first quarter, compared with a July estimate of 1.5 percent, the Bank of Korea said yesterday. The International Monetary Fund on Sept. 1 increased its forecast for the nation’s 2010 gross domestic product to 6.1 percent from a July estimate of 5.75 percent. The won remains “undervalued” and the central bank can still raise interest rates, it said."

2010: Where is the Growth?

and where will it be tomorrow?

Asian Sovereign Bonds and Quasi Sovereign Bonds are still offering nice returns for limited risk:

Outperforming Bunds:

"JPMorgan Chase & Co.’s index of Asian local-currency debt excluding Japan returned 13.2 percent in 2010. Global sovereign bonds returned 3.8 percent in that period, Bank of America Merrill Lynch indexes show. Bonds gained 6.2 percent in the U.S., 6.6 percent in Germany and 2.3 percent in Japan. An index tracking Greece, Ireland, Italy, Portugal and Spain fell 1.9 percent.

Asian bonds beat stocks by the most since JPMorgan started tracking the figures in 2003 as the MSCI Asia Pacific Index of shares excluding Japan fell 4.5 percent, including reinvested dividends. China’s yuan debt gained 3.2 percent in 2010, according to an HSBC Holdings Plc index, while the Shanghai Composite Index of stocks dropped 25 percent as the government curbed lending to avert a real-estate bubble."

Currencies, Yields:

"Malaysia’s ringgit, Indonesia’s rupiah and China’s yuan are among the 10 best-performing emerging-market currencies this year. Ten-year government bonds yield 3.88 percent in Malaysia, 4.92 percent in South Korea and 8.23 percent in Indonesia, compared with 2.95 percent on U.S. debt."

Gold, Asian currencies...the only way is up.

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