EM ended last week on a firm note. Given the absence of any Fed-specific risks or any major US data releases, that firmness could carry over into this week. The failure to reach an agreement in Doha by oil producers is weighing on some countries through lower oil prices, but the global liquidity story ultimately remains risk-supportive for the time being. China data last week was also helpful for market sentiment.
Foreign investors love Britain, but Brexit would kill the vibe. According to new research colleagues and I have conducted at the Centre for Economic Performance, leaving the European Union could lead to a fall in inward foreign direct investment into the UK of close to a quarter. This would damage productivity and could lower people’s real incomes by more than 3%.
Indonesian President Joko Widodo’s (Jokowi) order on 23 March 2016 that the Masela Block use an onshore Liquefied Natural Gas (LNG) refinery ended six months of intrigue — and years of delay — about Indonesia’s largest offshore gas field. Rather than the floating plant (FLNG) proposed by contractors Inpex and Royal Dutch Shell, gas will be piped to a remote island in Maluku Province where it will be liquefied and used for industry.
Bank Indonesia will use the 7-day reverse repo rate as its new benchmark policy rate, the ruling party in South Korea unexpectedly lost parliamentary elections, the Monetary Authority of Singapore eased monetary policy to recession settings, Turkey has nominated its next central bank chief, the Brazilian special lower house committee voted 38-27 in favor of impeachment, the first round of Peru’s presidential election was inconclusive
China’s slew of economic data lends credence to ideas that the world’s second-largest economy may be stabilizing. However, the data failed to have a wider impact on the global capital markets, including supporting Chinese equities.
In fact, the seven-day advance in the MSCI Asia-Pacific Index was snapped with a fractional loss today. European shares are also lower on profit taking, breaking a five-day advance. Commodities, including oil, copper, nickel and zinc are also trading off.
China’s largest hydroelectric dam on the Brahmaputra River (known as Yarlung Tsangpo in Tibet) recently became fully operational. The $1.5 billion 510 megawatt Zangmu hydroelectric dam has brought in its wake a flood of concerns, especially in India, regarding its downstream impact.
Last year, soon after taking power as president of Sri Lanka, Maithripala Sirisena requested a US$4 billion loan from the IMF to restructure its debt repayments. The bailout package was rejected by the IMF. It warned the government instead to rationalise the tax system and arrest growing inflation.
No one can feign surprise that the Bank of England kept policy steady. Nor was the 9-0 vote truly surprising, though there had been some speculation that of a couple of dovish dissents. Nevertheless, there are two important takeaways for investors.
The United Kingdom is seeing a weaker manufacturing sector, pressuring workers’ wages even as house prices continue to skyrocket and basic goods and services see accelerating inflation.
There is a common ploy used by many analysts and reporters that often simply does not stand up to close scrutiny, and would in fact be mocked in the university. The ploy is to take two time series and put them on the same chart but use different scales.
Such a ploy often is used to demonstrate a closer relationship between the two variables than is actually the case. A current example is a chart of the dollar-yen rate and Japanese stocks.
