catatan kasar JO @ekonomi global: jatuh hat1 (07 September 2015)

JO’s NOTE:

secara kasar (n sederhana): ekonomi global sedang dalam TRANSISI

… as a simple title of my note: global economy in transition

perubahan yang tampak: ekonomi amrik sedang TUMBUH, ekonomi China merosot, ekonomi zona euro mendatar, ekonomi negara berkembang (emerging markets) MELAMBAT, Jepang berfluktuasi cenderung melambat lage, begitu lah

… the major changes: US economy is growing, Chinese economy is downgrading, eurozone economy is flat, emerging markets economy is slowing, Japan’s economy is fluctuating tend to slow as well

mata uang terkuat saat ini: US Dollar

… the greenback is in it’s best price compared to other currencies

gejala utama perdagangan dunia: HARGA KOMODITAS terutama MINYAK n TAMBANG merosot

… the major change in global trade: COMMODITY PRICE decreasing significantly, especially the oil n mining sectors

gejala tambahan perdagangan dunia: EKSPOR ambles

… the additional phenomenon of global trade: decrease in global exports

gejala pemberat perdagangan dunia: cuaca ekstrim, harga komoditas pertanian INFLATOIR

… the weighty sign of global trade to come: extreme climate chane, the agriculture commodity price will rise significantly

gejala moneter: DEVALUASI mata uang (terutama saat ini Jepang n China)

… the global monetarian significancy: currency war (devaluation in Yuan n Yen)

kesimpulan sederhana n kasar: ekonomi global BERGESER BALEK K AMRIK

… the simple conclusion : global economy is going back to the USA importance

solusi jangka pendek: kebijakan The Fed makin strategis, yaitu MENJAGA STRONG DOLLAR tidak menjadi STRONGER DOLLAR yaitu dengan cara PENGETATAN MONETER tapi MENGENDALIKAN INFLASI agar IMPOR NEGARA2 BERKEMBANG K AMRIK KEMBALI MAMPU MENINGKATKAN EKSPOR NEGARA BERKEMBANG sehingga pertumbuhan ekonomi negara berkembang kembali MENGUAT

… short time solution for the global economy: the fed policy is increasing important to apply, that is to contain the us dollar strengthening not to become THE STRONGER DOLLAR. Monetarian tightening to contain the inflation so that the IMPORTATION OF EMERGING MARKET PRODUCTS may sustain

solusi jangka panjang: kebijakan STRONG US DOLLAR akan menjadi WEAK US DOLLAR dalam 5 taon ke depan

… the long time solution: in 5 years, the weaker us dollar may come again

……….1111111111111……………

MARKETWATCH –Last week we wrote a column discussing the devaluation in the Chinese yuan and the “reasons” behind the People’s Bank of China (PBOC) allowing the yuan to devalue. What we learned from this column was that, try as they might, the PBOC cannot control the value of the yuan, and ultimately the driving force behind the value of the yuan is the will of the market.

Since the yuan was devalued, we have seen a stock-market crash and huge swings in just about every foreign currency. Many pundits, of course, have claimed that the devaluation of the yuan was the proximate cause of the movements in the equities and currency markets. Unfortunately, they may need to re-evaluate their definition of “proximate cause,” as the equity movements occurred more than a week after the devaluation occurred.

Interestingly enough, during this market turmoil, the yuan itself has barely budged. Does this mean that the PBOC has things back under control? Has the currency war crisis been averted, or are we simply dealing with the market forces at work again?

Let’s start by looking at what happened to the U.S. Dollar index during this “crash” in the equities market. The U.S. Dollar Index which is comprised of a basket of six foreign currencies was actually down close to 6%. However, the dollar/yuan (USD/CNY) currency pair has hardly moved during this same time period.

Of course, since the value of the U.S. dollar was going down, and not up, it would make sense that the USD/CNY currency pair would also move down during this same time period. But the USD/CNY has not fallen nearly as dramatically as the U.S. Dollar Index as a whole for the simple reason that we are in differing wave degrees of correction. The USD/CNY is in a very minor fourth wave corrective pattern, whereas the U.S. Dollar Index is in a larger-degree fourth-wave corrective pattern.

Now at ElliottWaveTrader.net, we had actually been expecting this corrective drop in the DXY to occur. Similarly we also expected the price of the USD/CNY to consolidate at the current levels. So neither the drop in the U.S. Dollar Index nor the consolidation of the USD/CNY came as a surprise.

We are now expecting that the DXY will start a large rally to the upside that should eclipse the March high of 100.27. We have to ask what will this increased pressure on the U.S. Dollar Index do to the price of the USD/CNY.

Well as we can see on our USD/CNY pair in the chart linked below, the current pattern is extremely bullish. This pair is currently in a bullish consolidation pattern that will most likely resolve to the upside in a very strong manner. Of course, the next move will likely come in the form of another “surprise” to most. In reality it will occur when the PBOC once again finds the forces of the market too great to overcome and is unwilling to continue selling their foreign-currency reserves to artificially keep the price of the USD/CNY pair depressed. So while we cannot predict when this will occur, we can predict with a fairly high level of confidence that it will occur sometime in the not-so-distant future and causing the pundits to once again raise the alarms for an all-out currency war in China.

See charts illustrating the wave counts on the USD/CNY.

Co-written by Avi Gilburt and Michael Golembesky from ElliottWaveTrader.net.

August 28, 2015 12:35 am JST
Nouriel Roubini nikkei asian review

A Financial Early-Warning System

NEW YORK — Recent market volatility – in emerging and developed economies alike – is showing once again how badly ratings agencies and investors can err in assessing countries’ economic and financial vulnerabilities. Ratings agencies wait too long to spot risks and downgrade countries, while investors behave like herds, often ignoring the build-up of risk for too long, before shifting gears abruptly and causing exaggerated market swings.

Given the nature of market turmoil, an early-warning system for financial tsunamis may be difficult to create; but the world needs one today more than ever. Few people foresaw the subprime crisis of 2008, the risk of default in the eurozone, or the current turbulence in financial markets worldwide. Fingers have been pointed at politicians, banks, and supranational institutions. But ratings agencies and analysts who misjudged the repayment ability of debtors – including governments – have gotten off too lightly.

In principle, credit ratings are based on statistical models of past defaults; in practice, however, with few national defaults having actually occurred, sovereign ratings are often a subjective affair. Analysts at ratings agencies follow developments in the country for which they are responsible and, when necessary, travel there to review the situation.

 This process means that ratings are often backward-looking, downgrades occur too late, and countries are typically rerated based on when analysts visit, rather than when fundamentals change. Moreover, ratings agencies lack the tools to track consistently vital factors such as changes in social inclusion, the country’s ability to innovate, and private-sector balance-sheet risk.

And yet sovereign ratings matter tremendously. For many investors, credit ratings dictate where and how much they can invest. Ratings affect how much banks are willing to lend, and how much developing countries – and their citizens – must pay to borrow. They inform corporations’ decisions regarding whom to do business with, and on what terms.

 Tokyo, Aug. 25 (Jiji Press)–Recent global stock market sell-offs reflecting China’s economic slowdown have begun to give rise to concerns about the possibly fading effects of Japanese Prime Minister Shinzo Abe’s economic policy mix, dubbed Abenomics.
Financial market participants and officials in the Liberal Democratic Party-led ruling coalition are now calling on the government to take economy-boosting measures.
The stock market plunge could help weaken the so-called wealth effects of stimulating consumption by rich people through a rise in asset prices while leading to a spike in the yen against other currencies, a development that would dampen exports by Japanese companies.
On the Tokyo Stock Exchange, the key 225-issue Nikkei average plunged 733.98 points, or 3.96 pct, to end at 17,806.70 on Tuesday, the lowest closing since Feb. 10, after nose-diving 895.15 points on Monday, which was the steepest decline since May 23, 2013.
When the Abe administration was launched in December 2012, the dollar stood at levels above 80 yen.

South-east Asia’s currencies are plunging like its 1998

The rupiah and ringgit plumb depths unseen since the Asian financial crisis

This article was originally published in last week’s print edition. However, since Tuesday, many south-east Asia currencies, as well as China’s, have fallen sharply in value (see chart). Since this article is so relevant to the events of the past week, we decided to republish it on the blog:

NOT since Bill Clinton was president and Barack Obama was a law professor with a sideline in local politics have the beaches of Bali and Langkawi looked so inviting to Americans. Four years ago, a dollar fetched just over 8,500 Indonesian rupiah, and just under three Malaysian ringgit. Today a dollar is worth nearly 14,000 rupiah and almost four ringgit. Both currencies hit 17-year lows this summer, and kept falling (see chart).

In one sense, Indonesia and Malaysia are far from unique: declining commodity prices, the slowdown in China and the growing likelihood of an interest-rate rise in America have combined to make 2015 a miserable year for emerging-market currencies. Brazil and Russia are in recession, sending the real and the rouble falling. Turkey, with its slowing economy, huge current-account deficit and growing political instability, has seen the lira decline steeply; the Chilean, Colombian and Mexican pesos have all drooped.

But in Asia the rupiah and ringgit lead the race downwards, having fallen by 8.4% and 9.8% against the dollar this year—much further than the Thai baht (6.4%) and the Philippine peso (2.2%). Their problems are exacerbated not just by the Indonesian and Malaysian economies’ heavy dependence on commodities, but also by political ructions in both countries.

Start with commodities. The halving of oil prices over the past year has harmed Malaysia, which depends on oil for about 30% of its revenue. Indonesia is a net importer of oil, but other commodities still comprise around 60% of its exports—a worry, given that The Economist’s commodity index, which excludes oil, has declined by almost 20% over the past year. Thailand and the Philippines, in contrast, both have sizeable advanced manufacturing sectors: their top exports are computers and electronic components.

China’s slower growth and waning appetite for commodities have also been a drag on Malaysia and Indonesia. China is the top destination for exports from the Philippines too, but remittances from the millions of Filipinos working abroad have helped prop up domestic demand, thus cushioning the blow of falling income from exports.

Indonesia’s current-account deficit and the big share of its government debt in foreign hands will make it particularly susceptible to capital outflows in the event of a rate rise in America. (Foreigners also own a lot of Malaysia’s debt.) Even more worrying, much Indonesian borrowing, both corporate and sovereign, is dollar-denominated, meaning that as the rupiah falls the cost of debt service rises.

In response to these woes, Indonesia has fallen back on protectionism, as usual: in July it imposed import tariffs on a range of consumer goods, including coffee, cars and condoms. Despite much talk from the president, Joko Widodo, about upgrading his country’s infrastructure, little has been done. He came into office nearly a year ago with great promise, but some investors have started to wonder whether he is up to the job of pushing through the reforms his country desperately needs.

As for Malaysia, its foreign reserves look set to drop below $100 billion, depriving it of a much-needed buffer, and suggesting the government may have tried to prop up the ringgit. The woes of its prime minister, Najib Razak, who for months has been trying to dispel allegations of corruption, may intensify investors’ jitters.

The question now, for both countries, is how long the pain will last. Many predict that commodity prices will rebound; fewer predict when. In the meantime, depreciation should make their exports more competitive, but low commodity prices seem to be offsetting that gain. Indonesia is growing at the slowest pace since 2009. The falling currencies in both places are also stoking inflation. Whenever the Fed gets around to raising rates, these ailments will presumably worsen.

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