April 29th, 2008

Warren Buffet said US in recession when GDP less than 1% and US will probably be in one longer than most expect
Commodities all lower
Some KRW positive favtors. March c/a deficit was flat vs. US-$1.5bn, lower oil prices overnight, less dividend repatriation)
- expect swaps to move right as short-term USD funding improves and spot to stay supported
Singapore jobless rate rose to 2% in Q1 from 1.7% in Q4 with global economic backdrop
- MAS bi-annual briefing maintained 4-6% growth target and 4.5-5.5% inflation target
BoT gov Tarisa said main focus on rising inflation, price pressure not an impediment to growth and Thai take cues from US

Stocks to look at:
CUT: lumber ETF
HOV: make r of residential housing
NVR: home builder
PHM: homebuilder in US, Argentina, PR, and Mexico


South Africa
- trade balanced narrowed from Feb 5.8bn to March 5bn
- last week story of SARB governor from CNBC interview, but then realized that story was old and already aired on CNBC Africa
- Governor has made it clear magnitude of upward revision for Eskom electiricty tariff, and secondly, level of wage settlement
- with March CPIX at 10.1%, labor unions will mobilize to increase wages
- ZAR should see resistance at 7.63 and support at 7.48 in normal equity environment
- private sector credit growth (PCSR) higher at 22.62% vs. 20.5%

Zimbabwe electoral commission to examine recount on Thursday at 2pm

April 24th, 2008

NZD held rates steady at 8.25% when market expected cut
Norges Bank raised rates by 25bps from 5.25 to 5.5%
Beijing resciniding the stamp tax from last May saw the mareket up 9.3% in Shanghai composite
Short-covering in general in USD/Asia with USDMYR, TWD, INR all higher
INR swap points flew to +20 level
BSP left Philippines rate unchanged at 5% citing 2008 inflation target might being exceeded
Singapore March manufacturing due tomorrow and if week should see higher USDSGD
HK trade deifciti widened to HKD28.1bn in March, 2nd only to record from March '07, from risks to global growth sentiment, even import growth slowing as wlel
HK CPI fell from Feb record high of 6.3%, but still not comforting at 4.3% and slightly higher than expected
Talks of protest rally by People's Alliance for Democracy n Thailand, prices to hover b/w 31.35 - 31.60

South Africa
- Economic fundamentals and rate differentials favor short-term appreciation in ZAR but long-term still uncertain
- CPIX at 10.1% in March after 9.4% in Feb; food inflation main portion
- there were signs without Eskom would se eminimal inflation, but with Eskom tariff hike could push CPI to 11.2-11.4% by early July

A volatile day with Asia opening mixed. China reduced a tax which was originally instituted last year to quell stock speculation which sent the Shanghai index up 9%. We saw short-covering in USDMYR, USDTWD, and USDINR just on general risk aversion but also a retracement of significant recent appreciation of the Asian ccys. EMEA markets were slammed with very negative news out of CSFB and Barclays with ZAR, TRY etc all depreciating ove r 1%. US markets came in somewhat negative, with rates markets fairly calm when another day of a sudden sharp selloff in fixed income helped spur the biggest drop in EUR since 2004, with it falling all the way down to a 1.5638 low. Market very unsure of direction as US equities again finished very positive.

April 23rd, 2008

KRW tried to break 1000 but collapsed on exporter and long liquidation; 990-1000 should trade on fears of worse c/a deficit
Bank Negara estimated to have bought 1 yard USDMYR as market preferring MYR and SGD; CPI was lower at 2.8% so could provide rest
Singapore inflation at 6.7% in March, mktexp 6.8%, Bob sold another $250 usd; may break through 2% in SGD NEER

South Africa
- have raised 450bp in current cycle vs. 400bp in previous cycle; comments made Governor say policy is less accomodative vs. tightening
- next meeting is 12June
- low per capita income means inflation baskets heavily weighted to food and fuel
- affects countries where main products arent subsidized even more (so South Africa's inflation worse than India)
- in 2003, South Africa well adjusted politically so jumped on consumption bandwagon and increased c/a deficit, while Brazil was uncertain under Lula so grew domestic demand and favored commodity exports
- because of deficit, world marked as bad risk which hit currency which increased inflation
- massive inflows => easy political maneuvers to help the poor; artificially low interest rates; boosting growth; stronger ccy
- SWF could've solved this but Brazil, India, and South Africa too growth occupied

Asian markets were fairly positive as MYR and SGD continued to be the two currencies of choice with the Malaysian CB needing to intervene on the bid for nearly $1bn of USDMYR. Inflation concerns continue to dominate most nations as slightly positive SGD and MYR CPI figures could help halt currency appreciation. Thailand and Vietnam potentially will further alter rice dynamics with proposals to halt exports to maintain domestic supply to counter energy inflation. South African CPI came in higher than expected increasing chances for another rate hike in June meeting but currencies were fairly muted in reacting. EURUSD and USDJPY as well were fairly rangebound with a slightly USD positive note as equities were in the black and yields were higher.

April 22nd, 2008

PHP rate decision awaited on Thursday, expected unchanged
SGD lower, BOB sold $200mio with mostly intervention
HKD CPI fell sharply off Feb high, but not comforting; at 4.2% from imported inflation with food, energy + property prices
SGD CPI due tonight; mktexp up from 6.5% in Feb to either 6.8% in bbg or 7.1% in 4cast
- underlying food and fuel continue to surge inflation => tightening at 10Apr MPC, add to domestic inflationary pressure




South Africa
ZAR firmed on bets rising inflation will force CB to raise borrowing costs again;
expectations CPI rose 9.7% in Feb vs. 9.4% in Jan, 12th straight month will exceed 6% ceiling
CB had raised rates to 11.5%, highest in 5 years, on 10Apr, vs. 0.5% in JPY, 2.25% in US, and 2.75% in CHF
"bad news has been priced in so will make gains based on carry advantage"
Chinese ship carrying weapons to Zimbabwe wasnt allowed to port in South Africa
- reports that the ship was going to Angola, an ally of Zimabwe,

April 21st, 2008

Haiti's prime minister resigned over food riots; other riots in Egypt, PHP, IDR, Ethiopia, and Cameroon
Gold fell 5% on Friday; much more volume on the downside
Canada CB rate decision 22Apr; expected to cut rates 50bp to 3.0%

South Africa
- March CPI on Wed, PPI on Thurs; forecast a jump to 9.8% due to higher oil and food prices
- peak in inflation no longer behind us as Eskom tariff still proposed
- originally had forecast inflation to hit 10% in March and then moderate, but with Eskom can't hold to this


Asian markets fared positively as China introduced new restrictions on stock selling which were deemed very market positive. Currencies were fairly unchanged with brief spikes in USDINR and USDPHP on perceived risk aversion. Little data out of EMEAwith Russian CB chief saying they will introduce greater flexibility in the exchange rate. Main market news appeared to be continually rising oil prices, as further pressure now on middle eastern countries and Russia to adjust ccy's to reflect the gains. BofA earnings dominated the US market open as EURUSD was bid up back to last Thursdays levels of 1.5940 as stocks sold off. A fairly quiet day overall however, as market ended fairly flattish and it appears we're still trying to digest whether we have seen a bottom.

April 7th, 2008

CNY: CP set at historical low of 7.0020
HKD: overnight rates remained below 1% with abundant liquidityl Joseph Yam reiterated USD peg, cited study that if USD depreciates 10% will only raise prices 0.82% in short-term, 1.61% in medium term

SARB should hike:
- Price pressures spilling over to ex food and fuel (at 9.4% in Feb has been above 3-6% for over 10 consecutive months)
- Electricity and fuel will rise in 2008
- lower risk appetite will make c/a deficit funding more difficult
- economy has shown resilience to Eskom showck, grew at 5.3% in Q407
- rhetoric has been hawkish, on 03Mar Mboweni said consumers need to tighten their belts

Reasons not to hike:
- consumer demand is weak, especially with job cuts in the manufacturing and mining sectors
- Inflation is not demand-driven (mainly by food and fuel)
- Credit and liquidity growth has decelrated; previous rate hikes have taken effect
- impact of power crunch on economy is still uncertain
=> should be a rather short tightening cycle, limited to 50-100bps over the course of 2008

political implications = SACP and left leaning elements of ANC dont want rate hikes, with Zuma elected, critics of SARB have more voice, to shore up support ahead of August corruption trial, should be more anti-SARB

April 4th, 2008

SGD: Some talk of MAS shifting focus to boosting exports from curbing inflation, should hover around 3.5% NEER til 10Apr

THB: 09Apr MPC meeting, inflation has breached the range in Q1 at 5.0% (out of 2.8 - 4.0%) and no benign, but BoT said will be in line

April 1st, 2008

SGD: Pair traded with a heavy tone to low of 1.3765 but authorities quickly bid it up to 1.3800 where offers were strong. Should see support with USD strength but otherwise selling

THB: Central bank relaxed another measure where they increased the limit Thai investors can use on foreign securities to 30% from 18% to encourage more capital outflows