China Lures Less Investment Than Southeast Asia, BofA Reports – Bloomberg 03-04-14

Salient to Investors:

Chua Hak Bin at Bank of America Merrill Lynch said:

 

  • Total foreign direct investment into Singapore, Malaysia, Indonesia, the Philippines and Thailand was $128.4 billion in 2103 versus $117.6 billion for China.
  • Rising foreign direct investment into Asean will remain a favorable structural trend over the next few years, given favorable demographics, competitive wages and geopolitical competition between the superpowers which remain the major investors.
  • China’s ability to attract investment may be hampered by higher manufacturing wages and an appreciating currency.
  • Indonesia’s large domestic market, low relative wages despite minimum wage increases and a weak rupiah make it attractive for lure foreign investment.

 

A Japan Bank for International Cooperation survey showed Indonesia has overtaken China and India as the most promising country for Japanese companies for business development.

A drop in China’s working-age population is robbing China of an engine of three decades of growth, whereas Southeast Asia’s developing nations show rising numbers of youth search for employment, luring companies seeking a cheap labor force and new domestic markets.

Read the full article at http://www.bloomberg.com/news/2014-03-05/china-lures-less-investment-than-southeast-asia-bofa-reports.html

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O’Neill Says Emerging-Market Selloff Creates Buying Opportunity – Bloomberg 02-04-14

Salient to Investors:

Jim O’Neill said:

  • We are closer to a buying opportunity in emerging-market stocks than to joining in the panic.
  • While some places in the emerging world have real problems, to herald an emerging-market crisis is ridiculous. Ukraine, Thailand, Argentina and Turkey have some serious issues.
  • The Fed decision to taper is amplifying the selloff in emerging-market assets. Tapering is more problematic for emerging economics but affects everywhere, but is not to be confused with individual emerging countries having genuine problems.

Read the full article at http://www.bloomberg.com/news/2014-02-04/o-neill-says-emerging-market-selloff-creates-buying-opportunity.html

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Pesek on Asia: China’s Balancing Act – Bloomberg 12-16-13

Salient to Investors:

William Pesek writes:

  • I agree with Tom Holland at The South China Morning Post that China cannot both maintain 7 percent-plus growth rates and implement huge reforms.
  • Thailand has seen 18 coups in the past 60 years.
  • The whole reason for being bullish on Japan Inc. so far has been a weaker exchange rate, a stronger yen as the Fed starts to taper is a big worry, along with large Japanese businesses paring their projections for capital spending this fiscal year, signaling economic headwinds as a sales-tax hike looms in April.

Read the full article at http://www.bloomberg.com/news/2013-12-16/pesek-on-asia-china-s-balancing-act.html

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Irrational Exuberance Overtakes Asia – Bloomberg 12-12-13

Salient to Investors:

William Pesek is  writes:

The “Greenspan put” that flooded markets with cash whenever things got dicey has become the default position in Washington, while in Asia there is an even more dangerous escalation of this policy in papering over cracks in economies that desperately need tougher, structural reforms.

Indian stocks have hit record highs, everyone is talking about India turning the corner, despite nothing really changing from 3 months ago when the rupee was plunging to record lows, politicians fumbled at every turn, talk abounded it would become the first BRIC to have its credit rating cut to junk. India’s current-account deficit is still a danger, just temporarily disguised by a charismatic new central banker. India remains politically corrupt, and the odds are that the BJP is no more a force for change than it was in 2004.

In Japan, the Nikkei 225 Stock Average is up 47 percent despite not one of Abe’s restructuring pledges being fulfilled. Japan is just as heavily regulated, uncompetitive and devoid of innovation as it was the day before Abe came to office. All that is new is a stronger punch recipe. Japan has an overpriced, unproductive and shrinking workforce, not to mention an economic structure geared for success in the 1970s.

PBC Governor Zhou Xiaochuan is deluded in believing China that can grow close to 8 percent a year, no matter what Communist Party leaders do or don’t do. President Xi Jinping’s vague pledges to let markets play a bigger role in the economy has made him seem like a Chinese Margaret Thatcher. Yet as China ends a crackdown on fraud and clears the way for over 700 companies to sell shares, the coming boom in IPOs will benefit from a kind of reform halo effect.

The policies of central bankers in China, India and Japan is no replacement for real reforms, like curbing corruption, lowering trade barriers, creating jobs, encouraging entrepreneurship, building social safety nets, promoting sustainable development and reducing their own role in the economy. Monetary policy can cushion the process of fixing flaws in economies, but it is no substitute.

America’s Greenspanization unfolded at a time in the 1990s of relative stability in a very mature economy. Asia’s Greenspanization is happening far too early in the development cycle, and much too broadly. Evidence of governments letting central bankers do their jobs can be found in Indonesia, Malaysia, the Philippines, South Korea, Thailand and Vietnam.

Read the full article at http://www.bloomberg.com/news/2013-12-12/irrational-exuberance-overtakes-asia.html

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Julius Baer Says Thai Markets Retreat to Deepen: Southeast Asia – Bloomberg 12-02-13

Salient to Investors:

Mark Matthews at Julius Baer said the sell-off of Thai assets is not over and the protests will weaken Yingluck’s ability to increase investment in the economy – no one is itching to buy this market.

Joel Kim at BlackRock said the Thai baht is one of our bigger underweights.

Adithep Vanabriksha at Aberdeen Asset Mgmt said the weakening economy is more worrisome than the protests as it will affect earnings.

The SET Index is at 2.1 times net assets, a 39 percent premium versus the MSCI Emerging Markets Index, the smallest gap on a weekly basis since September 2012.

Petcharat Powattanasatien at Kasikorn Asset said the market should rebound strongly as soon as this political deadlock is resolved.

Thailand has had 9 military coups and more than 20 prime ministers since 1946.

Abdul Jalil Abdul Rasheed at Invesco Asset Mgmt said people still use mobile phones, buy the necessities, have banking products, and life goes on – this sort of democracy only happens in Thailand.

Kokusai Asset said the baht will remain weak as protests add to investor concerns about subdued exports and the current-account deficit. Takahide Irimura at Kokusai Asset said the longer this situation lasts, the more impact we will see on the economy – the outlook on the market and on the economy looks poor.

Read the full article at http://www.bloomberg.com/news/2013-12-02/julius-baer-says-thai-markets-retreat-to-deepen-southeast-asia.html

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Don’t Blame the Fed for Asia’s Problems – Bloomberg 08-26-13

Salient to Investors:

William Pesek writes:

Another 1997-like Asian crisis is highly unlikely because exchange rates are now more flexible, foreign-currency debt is lower, banks are healthier, countries are sitting on trillions of dollars of reserves, and economies are far more transparent.

The same can’t be said of 1994, when the Fed last reminded the world that its monetary policy is decided in Washington, not Asia. Then, Greenspan doubled benchmark interest rates over 12 months, causing hundreds of billions of dollars in bond-market losses and helping set the Asian financial crisis in motion. The dollar’s post-1994 rally made currency pegs impossible to maintain, leading to devastating devaluations across the region.

Asia’s real problem then was hubris, but now it suffers from a different kind of smugness. After the 2008 global crash, regional governments started believing their own press. They were convinced they had decoupled from the West. Bankers were abandoning New York and London for Hong Kong and Singapore. Asian debt had become a safe haven from turmoil in Europe. And, as China’s 1.3 billion people grew richer, the good times would keep rolling on.

Asia has come a long way since 1997 but rapid growth and unquestioned success in surviving the global meltdown has revived hubris. Currencies in Indonesia, Thailand and elsewhere suddenly seem toxic to investors, while India is in chaos at a time when China’s growth trajectory is more uncertain than it has been in 15 years.

Asia may be able to live without American and European consumers for 4 or 5 years, but thriving beyond that requires more buoyant and self-supporting domestic economies.

Complacency is too easy to find in Indonesia, Thailand, Philippines, and Malaysia.

Simon Grose-Hodge at LGT Group said the US has been given a free pass on the twin deficit issue, but emerging-market countries will not be so lucky.

In India, reforms have stalled and unaffordable government handouts have proliferated. With an election due in nine months, no one expects the hard decisions needed to get the economy back on track will be taken.

Unlike in 1997, Japan Inc. is healthier, the government is shoring up the economy, and the central bank stands ready to add new liquidity as the Fed’s tapering process begins. China will pull out all the stops to keep growth above 7 percent.

Read the full article at  http://www.bloomberg.com/news/2013-08-26/don-t-blame-the-fed-for-asia-s-problems.html

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Thailand Needs to Invest in People, Not Rice – Bloomberg 07-11-13

Salient to Investors:

William Pesek writes:

  • Thailand has 5.3 percent growth, a young and expanding population, and a surprising level of political stability. Yet Thailand has subsidized rice prices, provided handouts to car buyers and favored mega projects that will enrich the politically connected – all at the expense of long-term competitiveness and prosperity.
  • Thailand last week abandoned its plan to end hoarding rice at above-market rates: a practice that jeopardizes its fiscal position and warps commodity markets. Moody’s says the subsidies damage Thailand’s credit rating.
  • Thailand needs to invest billions in education and training to improve the quality of the labor force and raise productivity. Indonesia, Philippines and Vietnam are winning jobs that Thailand once took for granted. Thailand lags at the primary, secondary and at the tertiary levels of the education process. Thailand’s focus on rote learning gives short shrift to creative and critical thinking and English proficiency.
  • Peter Warr at the Australian National University sees little sign that inadequate investment in human capital and the need for reform of the education system is recognized by the government. Warr says there are few if any kickbacks available from investment in education, unlike physical infrastructure.
  • Thailand matters because it’s a role model in the region – Myanmar, Cambodia, Laos and Vietnam look to Thailand for direction and financing.
  • Piti Disyatat at Bank of Thailand says per-capita GDP has been stuck around 15 percent to 20 percent of US levels for more than 10 years.

Read the full article at http://www.bloomberg.com/news/2013-07-11/thailand-need-to-invest-in-people-not-rice.html

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