In today’s briefing:
- From Capital Wars to Currency Wars: Weak US Dollar in 2023?… Or Will the Yuan Tumble To RMB10/US$?
- China: Decisive Policy Shifts Improve Growth and Reduce Risks
- Thailand Visit Note: Politics Will Determine the Growth Potential of the Economy
- UK: Labour Fits the Fall Season
- Indonesia: Chugging Along as 3Q22 Growth Perks Up
- MADE FALSE BANK, AM RUIN*
- CX Daily: The Secrets Behind a Chinese Banking Superstar’s Fall
From Capital Wars to Currency Wars: Weak US Dollar in 2023?… Or Will the Yuan Tumble To RMB10/US$?
- Watch the CNY as well as DXY. Chinese Yuan has broken out of its long-established target band. Net capital outflows are very weak. Could the CNY test RMB10/US$?
- China’s broken economy needs a new source of demand that can create less debt dependent future GDP growth. Devaluation may prove the solution
- Oct/ Nov show PBoC injecting more liquidity into Chinese money markets after year of tightness, following attempts to support the Yuan. Lower CNY will allow PBoC more space to ease
China: Decisive Policy Shifts Improve Growth and Reduce Risks
- The economy continues to wilt under the pressure of multiple headwinds including new surges of covid infections and the deflating real estate sector.
- In response, China’s leaders have effected a decisive shift in policy. Covid restrictions will be more calibrated. Downside risks in real estate will be more vigorously addressed as well.
- Challenges remain including a likely weakening of the export sector. We expect more policy support which should suffice to produce a modest rebound in growth.
Thailand Visit Note: Politics Will Determine the Growth Potential of the Economy
- Thailand is one of the few economies that will see growth accelerate in 2023. The driving force behind Thailand’s positive cyclical outlook is the tourism recovery.
- Other factors also support growth, such as ramped up public investment and a surge in FDI approvals.
- The main downside risks are a prolonged slowdown in China, financial shocks, and geopolitical shocks. However, Thailand is sufficiently resilient to these risks.
UK: Labour Fits the Fall Season
- The UK unemployment rate surprisingly jumped to 3.6% as the single-month rate surged by 0.3pp. It is tracking a rise towards 3.8% in Q4, about 0.1pp above the BoE view.
- Demand in the official vacancies and redundancies data is falling further from their peak, toward the Adzuna version, but continues to imply a cushion to output falls.
- This surprise restores the cyclical ageing of the labour market while remaining outside the “burn-out” phase. We still see hawkish pressure fitting a 50bp BoE hike in Dec-22.
Indonesia: Chugging Along as 3Q22 Growth Perks Up
- The upbeat 3Q22 GDP speaks to our sanguine outlook for the archipelagic economy. We re-affirm our full-year forecast of 5.3% GDP growth in 2022.
- Investments will spearhead growth going forward, driven by the bourgeoning interest in the commodity refining sector, the inflows of manufacturing FDI, and the enduring emphasis on infrastructure development.
- Strong growth strengthens BI’s case for further tightening. BI could opt for a smaller 25bps hike, following the moderation in US inflation which buoyed market and risk sentiment.
MADE FALSE BANK, AM RUIN*
- In a world where it has taken us huge amounts of effort, paperwork, compliance and due diligence to open an office, get licensed and start to launch funds, it is genuinely baffling to watch how a pair of twenty somethings managed to first attract and then seemingly vapourise tens of billions of $ of investor money in an update of a classic bank run-albeit with a modern VC twist.
- Tales of how Sam Bankman Fried (perhaps it is simply nominative determinism rather than an anagram at work) not only fried his ‘bank’ but also managed to persuade some of the biggest names in VC to invest at high valuations in an unregulated business based in the Bahamas and yet none of them even wanted a seat on the board are simply extra-ordinary.
- Of course the fact that some of them included Softbank and Tiger Global should have been something of a red flag, for as Leo Lewis at the FT put it this week: “But where there is an opportunity to lose money on tech these days, Masayoshi Son still seems one step ahead of the market at having found it ages agoLeo Lewis, FT
CX Daily: The Secrets Behind a Chinese Banking Superstar’s Fall
In Depth: The secrets behind a Chinese banking superstar’s fall.
Xi raises Anti-Secession Law in talks with Biden about Taiwan, foreign minister says.
Teaching staff who harm children face lifetime ban.
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