Monday, June 18, 2007

Implosion Risks Elsewhere
It used to be that when global markets had a calamity, it had to be something imploding in Latin America. If it wasn't Argentina, then its Colombia, or Mexican peso, or the inflation spiralling out of control in Brazil. That was the tough times in the 90s. Even Russia contributed with a rapidly diminishing rouble in the 90s. Asia contributed its fair share with the 97 liquidity crisis.
Currency risks and default risks are now much lower. Just examining the table will show that countries do live and learn. Financial prudence and balance sheet management have been improved significantly, especially at Agentina and Brazil. While Colombia did not change much, its now one of the hottest country among the group of Latin American countries for FDIs and growth prospects. The one bad apple was the nationalising plans in Venezuela.
The better report card is also replicated in most Asian economies following the 97 financial implosion. Even Russia has improved by leaps and bounds, strong foreign reserves, even greater natural resources and its proper leverage into the global economy. Thus to find surprising financial implosions now are harder, which is also why the external risk element has been reduced significantly from the 'usual suspects'. Now the new suspects are innovative trading ideas - the carry trade in yen into high yield currencies. Track the following currencies close, in order of riskiness: NZ dollar, Turkish lira, Icelandic krona, Hungarian forint, South African rand, Australian dollar and Brazilian real.

1 comment:

Anonymous said...


The Leakers - Helmed by the often brilliant Herman Yau Nai Hoi (whom I believe was from Malaysia who became a great success in HK films). 7...