FX Thoughts : EM Asia In QuickSand
Emerging Market (n) – Country where politics matters at least as much as economics to market outcomes ~ Ian Bremmer, Eurasia Group
Economic development requires effective governments ~ Angus Deaton, Princeton
Emerging markets account for 50% of today’s global output (up from 20% in 1980) & 80% of global growth ~ Ian Bremmer
EM Crisis usually follow this path 1) Equities dump 2) FX dumps 3) FI dumps 4) Central banks raise rates 5) Economy dumps 6) FX dumps more ~ Chris Arnade
Findings : ‘political booms’, defined as an increase in government popularity, precede financial crises in emerging markets. ~ Christoph Trebesch, Helios Herrera, Guillermo L. Ordoñez 06 September 2014
Poor is hardly a good choice of word for EM Asia these days because it is almost dismal if we take a look around us that has erased all the profits from the popular election victories we had last year in India and Indonesia.
Singapore’s 2 nearest neighbours, Indonesia and Malaysia are both struggling with outflows and exchange losses and collapsing stock markets with Malaysia coping with a crisis of confidence in their political leadership that makes soap operas look boring at the rate the beans are spilling from the seams.
We have some mountains to climb if growth were to match expectations after the poor showing in the first half so far, except for Malaysia with vulnerabilities in Philippines and Indonesia, not mentioning the impermutable Chinese numbers that no one dares doubt (we shall not mention China today because China is all over the news anyway).
When we have USDMYR breaking its former peg level of 3.80 this morning, there, the USDIDR at its highest since the Asian Crisis, Singapore is the little oasis of calm caught in between.