Randomly Noted

We can’t really call them capital controls, or even quasi-capital controls. Can we call them capital curbs? Capital management?
Perhaps we can call them Claytons controls, after the nonalcoholic drink that was popular in the 1970s and 1980s for its slogan: “The drink you have, when you’re not having a drink.”

Asian nations aren’t calling their recent actions “capital controls,” and the measures being taken certainly aren’t draconian; so far this year it’s mostly been rhetoric from authorities, about watching hot money flows, while there have been modest steps in Taiwan, South Korea and Indonesia to make it a bit harder for people to move money around.

But it is clear that authorities are growing more anxious about how fast money can come in–and out–of their countries.

Continue reading…

(This earlier ran on Dow Jones Newswires as a Money Talks column)

For all the talk about new world orders, new blocs, new spheres of influence and such we are yet to see the Group of 20 flex much muscle, or the BRICs (Brazil, Russia, India and China) manage to stay on message.

 This while European Union members wrestle publicly with how to deal with Greece–particularly how much money to hand over.

Governments still prioritize their individual needs over collective decision-making, and some groupings are proving a particularly fractious bunch.

That means, noise aside, we are unlikely to witness a sea change shift from the U.S. as a central decision maker or the U.S. dollar as the main global currency, or a major change in the phrasing and nature of world trade agreements; we are likely to also see a fair amount of protectionism persist.

The weekend meetings in Washington DC of the World Bank, the International Monetary Fund, the G-20 plus the G-7 were a classic exercise in maintaining the status quo. Only last year everyone was talking about how the G-20 would soon supersede the G-7/G-8, especially given the growing influence of China among the pack of the stronger developing nations.

That had implications for all sorts of things in terms of the balance of power, from emerging-market nations’ ability to negotiate things like trade, to what sort of currency should be the world’s dominant medium of exchange.

China and India, et al, are emerging powers. They are gobbling up more of the world’s resources and playing a bigger role as well in global politics.

But why presume the “south” is any more of a united grouping than the “north”? Emerging market nations may be just that, but they don’t necessarily have a lot else in common. Grouping them together and saying they will have the same agenda on trade, currencies and monetary policy is ridiculous.

Countries will act together, but only up to a point. Unions look less solid when their individual interests may be put at greater risk. That’s true for the G-7, G-20, EU and BRICs alike.

Witness the comments from officials from India and Brazil in recent weeks along the lines that it wouldn’t be a bad thing if China allowed its currency to rise. Are we seeing a crack in the BRICs?

Witness the German Foreign Minister Guido Westerwelle reminding everyone on Sunday that his country is “not ready to write a blank check” for Greece, after Athens appealed for an E.U. and IMF bailout.

 
We all like to bang on about a new world financial order. In reality, any change will be slow and incremental. The U.S. (with its outsize influence on the IMF and World Bank) and its currency will be top dog for a while yet.

(This is a Money Talks column that first ran on Dow Jones Newswires earlier Wednesday)

Thailand is not the new Indonesia but the speed with which the country’s financial markets have calmed down over the recent political upheaval is encouraging.

Political ups and downs are nothing new for Thailand. Recent years have seen the ousting of former prime minister Thaksin Shinawatra, a military coup and frequent protests, and that’s kept investors away, leaving a hardy core of players.

The country’s been off the radar for many global fund managers for a while. Those who have been prepared to put money into Thailand in the first place know the risks involved and are prepared to take them.

That’s why we saw Thailand’s share market jump 5.4% Tuesday, while foreign investors were net buyers of THB1.38 billion worth of shares Monday, the first time they have been net buyers in five sessions. So far Wednesday, the index has slipped 0.2%.

The market had fallen 3.6% Monday last week, and–after a three-day market holiday–another 3.3% Friday, in response to the outbreak of violence between the armed forces and anti-government protesters known as Red Shirts, many of whom are allied with Thaksin.

Things have calmed since, though the protesters have pledged to continue their rally into May, and still demand Prime Minister Abhisit Vejjajiva dissolve parliament and call new elections.

But as players turn optimistic and markets look sharper (the U.S. dollar has fallen to a 23-month low against the baht, apparently leading to central bank intervention to try and curb the baht), the real question for Thailand going forward is longer-term money and whether funds that have previously skirted the country decide it’s time to park money there.

Bangkok must be looking at the investment renaissance that’s taking place in Indonesia with some envy.

Indonesia has not only managed to retain its core of investors, but also draw in fresh money from those who had previously given the country a miss. That’s in no small part due to the relative political stability in Indonesia these days, compared at least to Thailand and with elections coming up in the Philippines.

Thailand though is still some way from being a draw for funds that have avoided it in the past.

For that to happen there needs to be greater continuity in political leadership and for that leadership to put clear strategies in place to entice in foreign money for projects and development, not just markets, and for building domestic demand.

The current political uncertainty, as well as the tendency for Thai leadership in the past to make sudden and counterintuitive policy changes, will keep many funds out for some time yet.

Anyone living in Singapore has known for a while that the economy is coming back. Restaurants and bars are full, shopping centres are humming, and it’s harder to find an available taxi.
We had confirmation of that Wednesday with the release of first quarter gross domestic product data showing growth of 32.1% from the previous quarter in annualized, adjusted terms, after a 2.8% contraction in the fourth quarter of last year.

That’s the fastest growth since the data series began in 1975, and much better than economists expected (and perhaps the government, too–it has revised up its 2010 growth forecast to 7.0% to 9.0%, from 4.5% to 6.5%).
The data are good news for the rest of Asia. Singapore is first off the mark in releasing GDP for the region. It, like many of its neighbours, is a trade-dependent economy, relying heavily on its tech and pharma industries. Things are coming off a low base, but it does indicate real demand is there for Asia’s goods, especially from within the region itself.
Such readings are likely to reassure governments as they ponder how much, and how fast, to roll back some of the fiscal largesse that has been in the system for some time.
But quick growth also spells potential headaches. The Singapore data were so strong, they led the Monetary Authority of Singapore into an unprecedented double-barreled policy tightening.
The MAS shifted up its targeted trading band for the Singapore dollar and at the same time said it is now aiming for a “modest and gradual appreciation” of the currency–its main policy lever–against a basket of currencies. It previously had a neutral policy stance.
Other central banks in Asia, including India and Malaysia, have been moving also to tighten policy, while China is among those acting to mop up liquidity in targeted steps.
Things could become more complicated from here. Authorities in Asia ex-Japan are starting to grow more nervous about the inflation outlook. In Singapore, officials lifted their consumer price index growth forecast for this year to 2.5% to 3.5%, from 2.0% to 3.0% earlier.
Continuing to support growth while counteracting the effects of very loose liquidity and jumping pre-emptively on inflation will prove tricky. Authorities may not want to act too aggressively to tighten policy, but act too late and there will be even greater problems to fix down the road.

There’s also the ongoing question of China. It has been growing nicely and demand from that country has shielded many others from the worst effects of the global economic slowdown. But even officials there are warning against being too optimistic on the growth outlook going forward.

The head of Cambodia’s parliamentary opposition was in Singapore last night and spoke eloquently and wryly – with a slight French accent – about his country’s severe poverty and political dictatorship (which he compared to Mussolini’s Italy.) This self-effacing man will soon travel to the U.S. where his daughter will graduate from an Ivy League university with an emphasis on political science. As a colleague put it, perhaps the Rainsy family has produced a second-generation reformist leader. Continue reading…

Singapore “styles itself as Asia’s Switzerland,” writes DJN colleague Costas Paris. This is a problem, at the moment, as Western governments target money laundering and tax evasion around the world. Check out Costas’s story on DJN, as it’s the best look yet at what’s at stake for the southeast Asia city-state, whose economic future is at a sensitive crossroads. The global crisis has hit its exports hard as western consumption dries up, and its stature as a financial center has been imperiled by the credit crunch and implosion of the banking industry. Continue reading…

Standard Chartered has a note out today titled, “Thailand-Back to square one.” The bank says the weekend protests that caused cancelation of the Asean summit at Pattaya – only to sprawl into the streets of Bangkok and elsewhere - mean additional government economy-boosting measures will get delayed as Prime Minister Abhisit fights for his political life. StanChart seems to think the months since Abhisit took office, in December, had marked an improvement in Thailand’s outlook. It’s a rather naive view, in my opinion. Here’s an excerpt from StanChart’s report: “…Since Abhisit has been spending much effort repairing Thailand’s reputation as an investment and tourist destination following three years of political turmoil, as well as the airport sit-in by pro-Democrat demonstrators (yellow shirts) in November/December 2008. Following several overseas trips, including to Japan and attending the G20 summit in London as the chair of ASEAN, one could argue that positive progress has been made. This in turn made the East Asia Summit another important showcase to confirm that Thailand has returned to normality. ” My view is that Thailand has been stuck at “square one” since September 2006 when the military bosses staged their Thaksin-toppling coup d’etat, ushering in 2.5 years of political instability and, among other things, economic and regulatory missteps along the way. Anyone investing in Thailand since the third quarter of 2006 would have to be naive not to know that the country’s growth would be severely hampered as long as Thaksin continued agitating ex-Thailand amid the peculiarly destabilizing role of an aged Thai King. The country’s economy is shrinking, mainly as a result of the global downturn but aggravated by the country’s political mess. StanChart forecasts a 3.5% contraction. A relevant point in StanChart’s report is their contention that so far monetary easing (interest rate cuts) hasn’t had as much of an impact as hoped. Therefore, any delay in government fiscal measures is doubly regretful. StanChart is “short-term underweight” on the Thai baht but doesn’t expert USD to strengthen versus the THB because of growing risk appetite.  The bank also notes that most foreign funds aren’t particularly engaged in Thailand (probably they know full well the extent of the chaos there.) Thailand’s markets are shut until Thursday due to a national holiday.

DJN reporter Phisanu Phromchanya, covering the Asean meeting in Pattaya, Thailand, sends this dispatch about the anti-government protests which have overtaken this seaside town where leaders of southeast Asian countries are converging this weekend. Note: latest dispatches are at the bottom, so read from bottom up: “Leaders of the Red Shirts making speeches attacking Abhisit (prime minister) government and privy council Prem (adviser to King.) The speech is pretty repetitive. Thanks to the cloudy weather, mob in relatively cheerful mode as they’re not exposed to sunlight in mid-afternoon of summer peak. The pro-Thaksin protesters are calling for fresh election. They said they have nothing against other regional countries. They only want to pressure the Thai government to respond to their request. Police troops are carrying only shields with no batons or other weapons in sight.” Update: “The resort is on a steep hill with access to the beach. There are several battleships in the sea surrounding the resort. The resort is also accessible by helicopter, so leaders may have reached the venue by that means.” Update: “The latest development is the protest leaders gave the government 5 minutes to send a representative to meet them so that they can submit their request. Otherwise they might break in to submit their request to Asean leaders themselves. But it just sounds like a blunt threat to me. Don’t think they’re serious with the threat though.” Update: “Some protesters break into the hotel premises but just stop short of entering the conference center building. The protest leaders now upped their request, calling for representatives of all 10 Asean nations to come out to take their request within 5 minutes. Troops are tightening up security and tensions are on the rise.” Update and Goodnight: “Protesters pulling out for the day but say they may gather up again tomorrow to put pressure on the government.”