An interesting economic problem has spread throughout Asia (although not unexpected); which is the Asian export market has all but collapsed. This is in a sense going to be Asia's economic 'doom' situation. With the West, particularly America and the UK pumping billions into their banks. We have seen devaluation of both the GB pound and US dollar. So a currency based protectionism is all Asia has to stave off GDP collapse. So the West may pump money into banks (and the broader economy), the east is now trying to keep their export markets alive by selling their currencies and devaluing regional currencies. This is a inflationary central bank policy decision, especially for net importers of oil such as China, Indonesia and South Korea. You can sense that both big export countries such as China and South Korea are now not only over capacitating (swelling inventories) with their exports (from government stimulus), but they will struggle with profits from export markets - particularity if the region attempts to form a 'trade war' with currency devaluation. I think that South Korea's speculative recovery is more a stagflation orientated bounce, as it will inevitable struggle with inflation and over production in the near term.
Japan simple cannot be left out of the equation either, the magnitude of problems facing Japan are staggering.
USD/SGD graph. Note the USD against the SGD, Singapore's GDP has contracted 11.50% from a year earlier. Which is a good bell weather indicator to the dire export markets of Asia.
So there is a current buy on the USD against the SGD, not only from the devaluing off the SGD but also the USD is very oversold:
No comments:
Post a Comment