Best Forecasters See Asia Rebounding to Lead Gains: Currencies - This is a realistic assessment, in my opinion, reported by Bloomberg and broadly in line with the Fullermoney view. It is posted in the Subscriber's Area but here is the opening:
For the first time in three years, Asia will lead a rally in emerging-market currencies as rising global trade lifts the region's exports, according to the most- accurate foreign-exchange forecasters. India's rupee will climb 4.8 percent in 2013 after losing 17 percent over the past two years, according to Oversea-Chinese Banking Corp Ltd., the best forecaster based on data compiled by Bloomberg. The Philippine peso will gain 4 percent to its highest since 1999, said Standard Chartered Plc and Wells Fargo & Co., which tied for second. That would put them among the top- five developing-nation currencies, Bloomberg data show. Asia is poised to benefit as the International Monetary Fund estimates global trade will accelerate from the smallest increase in three years. Asia, which contributed to 44 percent of the world's economic growth last year, accounted for half of the top 10 currencies in 2010 as the world emerged from the worst financial crisis since the Great Depression. "The global economy is a bit brighter compared to six months ago, so that bodes well for the export cycle in Asia,"
Emmanuel Ng, a strategist in Singapore at OCBC, Southeast Asia's second-largest lender, said in a Jan. 7 interview. "We are getting signs of life out of China. It will continue to exert influence on Asian currencies."
My view - A few months ago, a consensus among somewhat cautious investors favoured Wall Street among stock markets. The USA has some advantages, in addition to liquidity and transparency, not least being its competitive energy costs thanks to the fracking technology which it pioneered to develop its vast reserves of shale oil and gas.
This is an enormous advantage for a large industrialised economy, not least due to the intense competition resulting from globalisation. Fracking technology was a private development, as I have mentioned before, in which the Obama administration had little interest. Now the White House is engaged in a tedious and acrimonious struggle with the Republican controlled Senate over the additional tax increases and higher debt ceiling that the President wants. The global financial world is unimpressed.
Meanwhile, Asia's two largest economies have morphed from serial underperformers to outperformers. The new governments in Japan and China, led by Shinzo Abe and Xi Jinping, are off to a flying start judging from their stock market performances since mid-November and early December, which coincided with the political changes. Additionally, Asia's third largest economy, India, has seen its best rally since 2010 since Prime Minister Manmohan Singh abandoned his Socialist coalition partners.
This item continues in the Subscriber's Area.
Platinum Advances to Three-Month High on Production Cuts - This is an informative article from Bloomberg. Here is the opening:
Platinum surged to a three-month high, exceeding the price of gold for the first time since April, after the world's largest producer said it will cut production. Palladium reached a 10-month high and gold rose.
Anglo American Platinum Ltd. (AMS) said today it will idle four shafts in South Africa, cutting output by 400,000 ounces a year, after a review of its operations. The reduction is equal to almost 7 percent of total global production. The metal is mainly used in pollution-control devices in cars and in jewelry, and Barclays Plc estimated last month that supply will fall short of demand by 38,000 ounces this year.
"There is a rush to buy platinum as today's news means that the market will be pushed further into deficit," Adam Klopfenstein, a senior market strategist at Archer Financial Services Inc. in Chicago, said in a telephone interview. "We are seeing strength in other precious metals as well."
Platinum futures for April delivery climbed 1.9 percent to settle at $1,689.90 an ounce at 1:15 p.m. on the New York Mercantile Exchange after touching $1,706.80, the highest for a most-active contract since Oct. 9. The precious metal has gained 9.6 percent this month, compared with last year's 9.8 percent advance.
My view - Presumably, this is a temporary measure, triggered by South Africa's protracted and violent miner's strike, exacerbated by union rivalry. However, it is part of an increasing mining problem, not least for relatively scarce supplies of precious metals. Miners are having to spend more but are often mining less ore, contributing to a shortage of precious metals relative to demand.
Fullermoney has frequently reported on these developments, often in conjunction with informed comments from the Collective of Subscribers. Here is a sample from Monday 1st October. ( See also a chart of platinum below, in the Subscriber's Area.)
Peter Bennett: In thrall to some defunct economic theory - My thanks to this highly experienced author for his historic perspective. His latest report is posted in the Subscriber's Area but here is a brief sample:
Indeed, Lord Keynes did recommend borrowing by the government in certain circumstances, per recent bulletin. But he made those comments in an era where, bar during wars, the government was a tiny part of the economy, unencumbered by the pre-existing mountains of debt that the modern politico-economy has brought about. I agreed with him then. And I agree with him now - where he was quite clear that adding to a mountainously high existing level of government borrowing would end up producing inflation - not the desired economic rebalancing.
His theory is currently completely traduced by well-known commentators who should know better.
This time, we have mountainous total economy debt in the debtor nations. There is no historically approved theory as to how to deal with such a situation. It has never previously existed. It is both irrelevant and wrong to drag Keynes' 'borrowing' theory into the current debate.
Keynes was suggesting relevant and correct policy for the 1930s. But note - a reminder from my bulletin (of several years ago) on the Great Depression - contrary to folklore, Roosevelt's fiscal intervention in the US economy was no miracle cure. Henry Morgenthau, his Treasury Secretary, suggested all his fiscal tinkering actually produced no net benefit. Folklore is just that. The US did not, in fact, put Keynes' fiscal ideas to the test. Devaluing against gold certainly did help. Inter alia it ramped up inflation for a while - which hugely helped debtors. These things are not as simple as they seem to those who rely on folklore.
My view - This is a good read for perspective. I commend it to subscribers.
My personal portfolio: A position increased - Details and charts are in the Subscriber's Area.
Additional commentary by Eoin Treacy
US listed Japanese shares It has long been our belief at Fullermoney that a weaker Yen would help the export-led economy and act as a catalyst for renewed interest in Japanese equities. Now that this is taking place, global investors are presented with a challenge in how to hedge their currency exposure and still benefit from the stock market's advance.
One way to do this would be via a fund that hedges its currency exposure. Another would be to short the Yen against one's domestic currency. The Proshares Ultrashort Yen ETF is a two times leveraged vehicle offering access to such a trade and while overbought in the short-term, the fund should continue to perform for as long as USD/JPY continues to advance.
Since December 1st the Nikkei-225 has appreciated by 10.05% in Yen terms but only 5.5% in US Dollars. In an effort to approach the market from the perspective of foreign investors I thought it would be instructive to have a list of companies that are listed in both Japan and the USA. Since many secondary listings are illiquid I filtered for those with at least some volume and sorted by performance year-to-date.
This section continues in the Subscriber's Area.
Guangdong party chief Hu Chunhua 'handled newspaper crisis well' This article from the South China Morning Post may be of interest to subscribers. Here is a section: Guangdong party chief Hu Chunhua has shown flexibility in resolving the crisis at the outspoken Southern Weekly newspaper, following the approach of his predecessor in tackling emergencies, analysts said.
The week-long confrontation between the newspaper's journalists and the provincial propaganda authorities over alterations to the New Year edition was temporarily resolved on Tuesday night as the editorial staff agreed to resume work.
Two sources close to the newspaper's editorial staff said the crisis was resolved as Hu had stepped in to mediate, striking a deal between the newspaper and the propaganda office.
"Hu only offered some basic principles to end the row, which included editors and reporters getting back to work and no punishment would be handed down to journalists. The newspaper will be published as usual tomorrow," said a source.
Hu did not make any public comment about the crisis, but he was involved in talks which also involved provincial propaganda chief Tuo Zhen .
The saga has attracted widespread attention on the mainland and scores of supporters of the newspaper gathered at its headquarters over the past few days. Yesterday, some supporters had several brief scuffles with Communist Party loyalists. My view This journalists strike may have been timed to probe the commitment of the new administration in continuing the long standing policy of curtailing press freedom. The fact that a soft approach has been taken is to be welcomed and may be a signal that a more lenient approach can be expected in future. When we ask the question whether governance is improving or deteriorating this story is a positive outcome and should help to bolster investor confidence that the central government are not about to stoke widespread resistance through heavy handed tactics in the nation's most liberal province. .
This section continues in the Subscriber's Area.
Final EU pre-accession funding to help Croatia become a successful EU Member State This press release from the European Commission (dated December 14 th ) may help to explain recent investor interest in the Croatian stock market. Here is a section:
The European Commission has approved the last pre-accession and transition assistance programme for Croatia. The €46,8 million programme will focus on strengthening administrative capacity for an efficient justice system and the protection of fundamental rights. The funding will also support Croatia's on-going efforts to build a modern, transparent, and citizen-oriented public service.
" Croatia is almost there. I am confident this year's programme will help Croatia reach its last goals in preparing for the entry and become a successful EU Member State ", said EU Commissioner for Enlargement and European Neighbourhood Policy tefan Füle.
As well as focusing on key reform areas, the last pre-accession programme will also help upgrade the border infrastructure in Tovarnik and Maljevac, rehabilitate the Turopolje Correctional Institute, provide support for Croatian Civil Society Organisations, and finance de-mining activities in Lika-Senj, Sisak-Moslavina, and Zadar County.
Since 2007, the EU has made available a total of €998 million in financial support to Croatia under pre-accession assistance (IPA). All these funds have now been allocated. As a future EU Member State, Croatia will subsequently benefit from Structural and Cohesion funds.
My view The Croatian currency is comparatively firm against the US Dollar and the stock market has rallied for the last five consecutive weeks to break the two-year progression of lower rally highs. A sustained move below 1750 would be required to question medium-term scope for additional upside.
Swiss Franc Falls, Euro Rises as Crisis Fears Abate This article from Dow Jones NewsWires may be of interest to subscribers. Here is a section:
Mr. Draghi suggested that further interest rate cuts were less likely than previously thought and cited the decline in the borrowing costs of the euro zone's more fiscally frail states, with yields on 10-year Spanish government bonds dropping to their lowest levels since March.
"As the euro-zone debt crisis is abating we expect to see further support for [the euro against the Swiss franc], as it was mainly the role of the franc as a safe haven that supported the Swiss currency," said Lutz Karpowitz, chief currency strategist at Commerzbank AG in Frankfurt.
My view Demand for a safe haven outside the Eurozone zone drove the Swiss Franc to such high levels that the SNB felt obligated to put a cap on the advance and drew a line in the sand a €1.20. However as the fear of an imminent breakup of the Euro recedes there is less demand for a safe haven. The EUR/CHF rate is currently rallying away from the €1.20 area and a clear downward dynamic would be required to check momentum beyond a brief pause.
Email of the day on additions to the Chart Library:
3618 Chongqing Rural bank - could you please add?" And
Can you add the following French Biotech Company to the chart library please?
Sartorius Stedim/ Sartorius AG
My comment Thank you for these suggestions which have been added to the Chart Library.