Saturday, December 16, 2006

"Asian Central Banks May Spook Investors in 2007"

its all about liquidity! to me it looks like the central banks "have" to spook investors or to say it more detailed "speculators".
es geht einzig und alleine um liquidität. meiner meinung müssen die notenbänker dringen eingreifen um investoren oder besser gesagt die spekulanten ein bißchen aufzuschrecken.
(Bloomberg) -- While a housing-led slump in the U.S. economy may indeed emerge as the biggest risk to Asian economies in 2007, a more immediate threat to investors will probably be posed by the region's central banks.

Policy makers in China, South Korea and India may have no option except to aggressively contain domestic liquidity and stamp out asset-price bubbles ....
Relying on ``shock therapy,'' central banks in these countries might end up making overstretched securities -- such as Indian and Chinese equities -- more volatile than they have to be. A case in point was the bloodbath on Indian stock markets earlier this week. ( mmmh, but when you look just 2 days later the market was unchanged close to another all time high. looks like there is much more work to be done.....!/mmmh, nur 2 tage später alles wieder ausgebügelt und nahe einem neuen ath. sieht so aus als wenn dort nich mehr zu tun ist......)

In Asia outside of Japan, lax local financial conditions and the authorities' efforts to deal with them may have a greater bearing on investor sentiment than anything that the Big Three global central banks may or may not do.

Perils of Shock Therapy
Some evidence of that came this week when the benchmark Indian equity index plunged 5.8 percent following the central bank's surprise announcement that it would remove 135 billion rupees ($3 billion) from the banking system by raising the ratio of deposits banks are required to hold as cash.( china did the same "thing"just last week.)

maybe they should be more radical like japan. they have been critizised for halting their rates close to zero. but they have taken action!
So the Bank of Japan did what any self-respecting central bank would do (unfortunatly they are the exception/leider ist das eher die ausnahme). when called on the global carpet for “creating” too much liquidity, they stopped. And not only did they stop, they began an immediate program of erasing their quantitative easing (printing money) efforts of the last half decade by beginning to shrink the Japanese monetary base in very big and rapid fashion. this is from contrary investor. i suggest to read the full excellent piece".

The need for cooling the overheated Indian economy is undeniable. What investors can't take for granted is that it will be accomplished in a credible manner.

The Reserve Bank of India isn't the only Asian monetary authority to resort to shock therapy. In Korea, the reserve requirement on demand deposits is going up by 2 percentage points after Dec. 23 to deflate a housing bubble. The decision, announced by Bank of Korea last month, is the first increase in reserves in almost 17 years.
Fragile Korean Consumer
The question in Korea is whether monetary policy will achieve a soft landing in the housing market or cause it to crash.

According to Samsung Economic Research Institute in Seoul, housing prices nationwide rose more than 11 percent in the first 11 months of 2006, compared with less than 6 percent last year. In overheated pockets, price escalation is even more rapid.

With floating-rate mortgages accounting for 98 percent of the total, a sudden drop in home prices may further depress consumer sentiment, which has yet to recover from a credit-card bubble that burst in 2003. (amazing. the debt latest debttruoble is just 3-4 years old..../ erstaunlich. nachdem der letzte bubble gerade 3-4 jahre alt ist......)

Lee Seong Tae, the central bank governor, made it clear that he won't make a habit of manipulating reserve requirements. That's reassuring. Changes in reserves, because they have long- term effects on money supply and economic activity, are generally seen as a central bank's weapon of last resort. ``The change in required reserves won't come often,'' Lee said.
the fed of course has just done the opposite and has eliminatet the reserve back in 1995./die fed hat im jahr 1995 genaus das gegenteil gemacht und die reserve defacto auf 0 gesetzt. thanks to this "piece What (Really) Happened in 1995?" from aaron krowne / itulip!
The key event that happened around 1995 is that the fractional reserve ratio was not only lowered, it was effectively eliminated entirely. You read that right.

`Heavy Dose of Medicine'
There are strong expectations that the People's Bank of China, which has already raised the reserve ratio by 2 percentage points in three steps since June, will be forced to act again to mop up the surfeit of liquidity being released by its massive trade surplus. (see first link/ siehe erster link)

People's Bank of China's third-quarter monetary policy statement released last month included 70 references to liquidity.

``Given the abundant liquidity, an increase in the reserve requirement ratio by a small margin is not a `heavy dose of medicine,' but rather a fine-tuning,'' the bank said.

Dearer Money
China's liquidity challenge is compounded by expectations of currency appreciation. The yuan, traders reckon, must strengthen substantially against the dollar to reduce the growing likelihood of the U.S. Congress passing punitive legislation against Chinese exports. (the us should be pleased with china thta it pumps all the surplusses back into the $. almost 1 trillion and counting....../ die usa sollen froh sein das china die ganzen überschüsse zurück in den $ pumpt. jetzt ne billionen euro und steigend....)


The one-way bet on yuan appreciation is drawing in overseas capital and pushing up equity prices in Shanghai and real-estate values in Beijing to dizzying heights. as shown "here"

While China's economy is plagued by overinvestment, India's is overheating. ..korea is also surprisingly strong.....

At least in these three Asian nations, investors may not find themselves worrying as much about a U.S.-induced growth slowdown next year as they may about the central banks suddenly turning off the money taps.

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1 Comments:

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8:22 AM  

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