Markets

A Malaysian Odd Couple


On Monday 5 September 2016, former Malaysian Prime Minister Mahathir Mohamad did the unthinkable. He turned up at the High Court for Anwar Ibrahim’s filing of an interim injunction to stop the enforcement of the newly passed National Security Council (NSC) Act.

Mahathir shook hands with his former ally turned nemesis and both exchanged pleasantries. He wished Anwar well and prayed for the jailed opposition leader’s success. They talked for a good 45 minutes in the witness room — a long time indeed for two bitter foes.

Mixed Results in the Rest of Asia over the BOJ's Policy Decisions


Like other central banks in advanced countries, the Bank of Japan (BOJ) adopted an unconventional monetary policy after the 2007–2009 global financial crisis (GFC). After Prime Minister Abe advocated the new policy regime, Abenomics, the BOJ became highly aggressive in its unconventional policy (see, for example, Fukuda [2015] for details). On 4 April 2013, BOJ Governor Kuroda introduced quantitative and qualitative monetary easing (QQE) and committed to achieve a 2% inflation target in 2 years.

Teeing Up the Emerging Markets


EM ended last week on a soft note. Perhaps it was the North Korean nuclear test (see below).  Perhaps it was disappointment in the ECB or rising Fed tightening odds. Whatever the trigger was, EM FX weakness persisted and appears likely to carry over into this week.

Indeed, as the September 21 FOMC meeting approaches, markets are likely to get even more jittery and choppy.  Just to keep things in perspective, after Friday's drop, SPX has retraced less than 38% of the big post-Brexit bounce and so this correction in “risk” could go on for a bit longer.

India, North Korea and Mexico Dominated the EM Headlines


In the EM equity space as measured by MSCI, Colombia (+4.1%), Hong Kong (+3.9%), and China (+3.6%) have outperformed this week, while Thailand (-4.4%), Qatar (-3.3%), and the Philippines (-2.7%) have underperformed.  To put this in better context, MSCI EM rose 1.2% this week while MSCI DM fell -0.5%.

By One Standard, Indonesians Fall Behind Academically Early On


Indonesia has consistently underperformed in the Program for International Student Assessment test — a standardised test administered by the OECD to measure the academic performance of 15 year olds.

More recently, the OECD also administered the Programme for the International Assessment of Adult Competencies (PIAAC) tests for individuals aged 15–65. The results for Indonesia were similarly underwhelming.

Could THAAD Backlash Derail Regional Harmony?


South Korean President Park Geun-hye’s unilateral decision to deploy a Terminal High Altitude Area Defence (THAAD) missile defence system has sparked serious backlash and protests at home. Many South Korean voters argue that the THAAD’s powerful radar system would make the country a key military target.

In addition, the South Korean defence ministry, in vowing to minimise any impact from THAAD on citizens and the environment, has validated these concerns.

Can Duterte's War on Drugs Succeed Where Thailand's Failed?


The Philippines has scaled up its war on drugs with devastating consequences. President Rodrigo Duterte’s tough talk and anti-drug platform has led to a staggering number of vigilante killings and the mass incarceration of people associated with drug use and its trade. However, we’ve seen this before. 12 years ago, Thailand launched a bloody and ultimately futile war on drugs.

New RBI Governor Patel Faces Many Challenges


Urjit Patel took over as Governor of the Reserve Bank of India (RBI) on 4 September 2016. At 52 years of age, he is among the youngest to be appointed to the position. Hopefully this is indicative of a broader trend of appointing younger Indians to senior policymaking positions — in line with the nation’s youthful demographic profile.

China Welcomes the G20 to SimCity


China is gearing up to hold the G20 summit in its eastern city of Hangzhou. It’s a fitting location for the leaders of the world’s 20 leading economies (19 countries and the EU) to meet. Famed for its beauty, Hangzhou is also a key part of one of China’s most entrepreneurial areas, Zhejiang province and a vital contributor to the country’s exports and GDP. Suffice to say, Hangzhou and Zhejiang count for a lot in China.