The Banking and Strategy Initiative

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Global Moves: Brazilian lending crosses 50% of GDP, Korean manufacturing up

Samsung and Kia/Hyundai are going strong as US Imports have held up and thence production Korea sustained at 83 levels. Meanwhile in Brazil Bank credit always in short supply because of fears of hyper inflation has in fact reached record levels of 51% according to the FT emerging markets blog “Beyond BRICs”.  However, that has released a flurry of analysis likening the continuing 18-22% growth in BRICs and other emerging markets as a recipe for inflation overkill and some would be wary though Brazil GDP growth is yet to get back into positive territory. Most of this analysis is a little of a bias the IMF economists have held as the Europeans were also consequently expecting a large impact of European bank deleveraging on Asia which has been minimal. In two years even US banks have degrown loan assets by 10% and in India’s case total deleveraging from Europe for example was hardly a total of $10 B which was promptly replaced.

Noises to support Mexico and Indonesia in portfolios at the expense of BRICs have been also getting louder but most wait and watch as China’s local currency swaps with trading partners make it a more impactful currency in the Global trade markets. The Yuan has fallen from 6.3 to 6.36 this year or 2% as the trading range was increased ostensubly to let free market forces find a bigger appreciation level for the currency. The currency promptly fell of course as investors , many local citizens who lend and speculate in the shadow banking market and property sa china’s prospects and that of a strong currency receding.

LONDON - MARCH 16: Angel Gurria, OECD Secretar...

LONDON – MARCH 16: Angel Gurria, OECD Secretary-General speaks at the Treasury during the launch of the Organisation for Economic Co-operation and Development’s (OECD) Economic Survey of the UK, on March 16, 2011 in London, England. With the Budget due on March 23, Osborne stated that it will will echo the message from the OECD, that ‘this Government has set the right course for the British economy, but we have still much more to do’. (Image credit: Getty Images via @daylife)

Meanwhile Europe’s Summit weekend has led to a gradual denoument of positive noises of a roadmap for a Banking and from some commentators even Political union as the German concept of a Fiscal union based on Central budgetary control starts looking appealing before the summit. The Euro remains weak as not much is expected in terms of final answers from this summit and Merkel opposed to sharing the debt burden in her lifetime

The latest in Global recessionary trends would be the idea of a two decade long low growth / recession in most OECD markets. For economies like Korea, Thailand and Brazil which are largely export dependent, this means a struggle to manage OECD customer demand as also flailing demand in other Exporter nations that use imported raw materials in the Global supply chain including China

Dollar as safe haven started losing its charm as Treasuries faced some selling in the face of weaker auctions and the Euro bailouts reaching the next level of a banking union The 10Y US bond yield is now up to 1.62% , level sat which it was always trading even when the quotes came to 1.4% last month. Yields in Us will hopefully rise towards sustainability making Global stimulus easier to manage as money supply in the OECD markets awaits the next bailout

Korea is facing a drought at home but manufacturing strength kept Foreign investors interested and buyers in the Bond markets The WON started back against the Dollar as Exporters sold to get the currency advantage in time. Volatility in the WON(KRWUSD) dropped to 8%

Meanwhile we also came across a article whih pointed out that even India’s stable growth of 50% in 2006-2010 came at the cost of 150% increase in M3. Well, India is nowhere near its first ever hyper inflation incident and the inflation monster is likely to show up in more global flow driven markets like Russia, Brazil, Venezuela and Argentina again which continue to try anti intuitive fiscal measures to break the bad run this year.  India’s exports continue to make less than one third of the GDP as also consumption as Consumer Imports in OECD and LATAM and Pacific are replaced by Oil and intermediate / Basic goods imports in India.  In China the crackdown on rising consumer Imports has been keeping imports low as state officials sell their luxury cars while in Australia imprts of Cosmetics and non dairy foods has been coming down on its own steam from before the RBA cut rates and raised stimulus for home buying.

Currency fraud issues have enveloped Asian luxury / high value importers like Reebok and Esprit. UK in the meantime gets cautious as its sovereign debt maturity has grown out on the right to 12.5 years from 10 yeaars twwo years ago and Foreign investors holding 30% of UK debt may now not be as interested in UK as a safe haven as stimulus flows increase and percentage contribution of investors in the BoE holdings gets limited.


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