Market Thoughts --- Yen Carry
Oversea Market Review
Global stock prices firmed 0.2% O/N with +1.3% in US and +0.8% in EMs, but -0.3% in EU and -1.1% in
US Economy
Sitting back and looking at the overnight
The data proves how difficult it is to call a bottom or trade a bounce.
Ø +VES: Headline CPI at -0.4% should ease the fear of significant inflation ahead;
Ø Green shoots data were the NY Empire FED bounce (-14.65 from -38.23), just as the NAHB housing index (14 from 10 )and FED Beige Book suggested a less glum outlook;
Ø -VES: the massive industry capacity available showing historical lows CapU at 67%;
Ø n TIC data concerns me that the
Cross asset market wise, US stocks rallied marginally, bonds moved into slightly positive and gold and oil were flat. USD managed to move higher vs EUR and JPY.
Ø Global FX wise, JPY carry trade is back and I think this weaker YEN may be the only way to combat the 38% y/y drop in IP or the massive mismatch of deflation and debt.
Ø This matches my talk with RCM and Pyramis friends, whom they saw continues fund flows to
But overall, there remains plenty of doubt in the market as those data proves inconclusive. I feel the market atmosphere is yellow for caution. It is understandable as we need time to shift from a free fall economy to a bumpy bottom.
The Chinese data, already leaked, is key to watch as many see
1Q GDP 6.2% 6.8% (4Q08) 6.1%
March CPI -1.3% -1.6% Feb -1.2%
March PPI -5.8% -4.5% Feb -8.9%
IP 6.8% 3.8% Feb +8.3%
Retail sales 14.6% 15.2% Feb +14.7%
FAI 26.4% 26.5% Feb +28.6%
My own estimate on GDP components and weighting is
Retail 14.7% 0.2 3%
FAI 28.6% 0.4 11%
Export -20% 0.4 -8%
Ø The 6.1% growth makes sense as, if one remembers that during the Asia Financial Crisis, real growth would have slowed below 6.0% but it always reported as slightly stronger --- Confidence issue!
Ø Key is this economy remains heavy weighted by FAI and Export. That is a problem.
Ø My question is on the mismatch of corporate CAPEX plan for most companies in 2009 vs. the huge amount of bank loans growth in 2009?
n Today it is reported that CBRC to refine administration over use of loans to promote the principle of “payment to the beneficiary in order to prevent misappropriation.
n But I think the fact that additional credit flows into stock market is quite apparent. The regulators should have been aware of the problem but again this helps boost the CONFIDENCE, so they might let it go at current stage as CPI and PPI is not responding to the liquidity boom.
n Recently I also find some NEGATIVE comments from
n Question is when PBOC and most banks will tighten credit? I guess Year end 2009, if
In addition, earning wise, I won’t put too much credit on 1Q09 data as it is not audited and many management I have met so far are hesitated to give a clear guidance, like CCCC or
My preliminary thought is, "Sell in May" in China Markets may be delayed to "June or July" when the markets see more creditable liquidity tightening warnings and somehow WTE 1Q09 results.
April 16, 2009
