Thursday, February 21, 2008

Asia Snapshot

Though the table above is a ytd up to only end September 2007, it does shed many insights.

* Malaysia’s ringgit only gained 3% against the USD in the said period but has risen more over the last 5 months. Hence the ringgit basically did some catching up in recent months, with more upside in store. Bank Negara has been too cautious in allowing the ringgit to rise over the past two years. That is why despite the gains vis-à-vis the USD, the ringgit has not been gaining much ground against other Asian currencies, especially the bath, including the Sing dollar, the euro, the pound and the Aussie dollar. Have you been traveling recently, the ringgit does not go far unless its HK or the States (USD), anywhere else its the same as it was two years ago. Let's remember that we have saved up tons in foreign reserves. Yes, Bank Negara is deliberately improving our competitiveness via a weak ringgit. Trouble is we get tons of inflation this way. Hence I see a bigger upside for the ringgit vis-a-vis other Asian currencies and also the developed nations' currencies. About time.

* Thailand is in danger zone. Have you seen the baht over the last 12 months? Look at the inflow of FDI, but most are speculating in Thai property. Given that Thai stocks are still in single digit forward PER, there is some justification for the inflow. However, the baht's strength is looking speculative, and certainly won't help its competitiveness. It was exactly this kind of openess in its capital account that led Thai baht to implode first in 1997. Thankfully the rest of its neighbours are not allowing such excesses this time around. Any implosion may rattle the region but won't bring the rest along with it.

* Save for China and India, Singapore stock gains were much higher than the rest. Korea had the same experience. Why? One, their stocks were more regional and international in exposure. Two, they were bigger beneficiaries of hedge / private equity funds. Going forward, there will be a curtailment of these funds activity due to the sub prime less now spreading to some of these leveraged funds. Hence we may see more volatility on the down side for these guys.

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