Three companions enjoyed a midday meal. The first says, “I’m satiated. The food and drink have done the trick. I’m ready to return to work.” The second says he still has room for a dessert to top off the wonderful meal. They look to the third, who doesn’t know quite what to do. She did not eat much to begin and needs her energy, but she is too disciplined to have dessert.
The U.S. government’s budget deficit fell to its lowest level since 2008 as the trade deficit rose due to weaker demand for U.S. products abroad and Federal cost-cutting at home.
The drop in oil prices since mid-year has been a significant development even though the broader ramifications for world growth, prices and policy are only now being worked out. Just as the inflation predicated in the US as a consequence of the Fed’s serial QE has not materialized, so too have the forecasts of forever higher oil prices as everyone knows we are running out of it, has turned into its opposite.
Xi Jinping has tackled serious domestic and foreign policy challenges since he assumed leadership in November 2012. He has put great effort into an astonishingly large-scale domestic anti-corruption campaign and has invested diplomatically in enhancing China’s image as a major country and leader in the region.
There is good news and bad news about the recent string of victories of the ‘Red and White’ coalition in the Indonesian parliament. The good news is that unlike previous Indonesian presidents, President Joko Widodo — popularly known as Jokowi — will have to face a critical and probably hostile parliament. This is also the bad news.
Overall, the investment climate for EM is likely to remain negative in this strong dollar environment. A weaker than expected official China PMI over the weekend didn’t help matters. Indeed, most of the Asian PMI readings out already came in weaker than expected, with Korea and Indonesia coming in below 50. Expect further deterioration in EM sentiment ahead.
There are three elements to the investment climate: The divergence between the US on one hand and Europe and Japan on the other, the drop in many commodity prices, including oil, and the slowing of the Chinese economy.
Last week, the divergence was driven home by policy makers. The contrast could not be starker. The FOMC ended QE, and seemingly began prepare investors for a rate hike next year, and the Bank of Japan, surprise of extending its asset purchases from JPY60-70 trillion a year to JPY80 trillion.
Regional economic cooperation in Asia and across the Pacific was developed around the idea of open regionalism and building the capacity for regional development in the global, multilateral trading system. Global institutions — the GATT and then the WTO — underpinned Asia’s confidence in deeper integration into the international economy and successful trade and industrial transformation through trade, economic reform and multilateral or unilateral liberalisation.
Stocks surged late last week as Japan surprised markets with a new bout of quantitative easing and low oil prices brought cheaper gas to more American pumps.
The effects of Japan’s feed-in tariff (FIT) for renewable energy have been impressive. Since 2011, Japan has seen a massive expansion of solar photovoltaics (PV). The size of the domestic market increased from 1GW in 2010 to almost 7GW in 2013. This solar expansion is expected to continue with the 2020 target for PV installations raised from 14GW to 28GW. But the success of renewable energy should not be taken for granted.
