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…

Earlier this week currency and stock markets more or less took North Korea’s nuclear device test detonation in stride – ditto the short-range missile tests. Today feels different. Pyongyang has just said it might act militarily as South Korea joins the U.S.-led, anti-nuclear Proliferation Security Initiative. It also issued some other provocative statements, including that it won’t guarantee the safety of offshore shipping traffic.  North Korea’s harsh warning comes in the wake of its first detonation since 2006 - and a much bigger one – and an unusual cluster of short-range missile firings. It amounts to an escalation of tensions which investors have to consider factoring into their decisions. A WSJ op-ed by three American elder statesmen calls for President Obama to lead a renewed deterrance effort involving Russia and China. The fact that Beijing responded to Monday’s nuclear detonation with strong words for Pyongyang may be a sign it will participate fully in a U.S.-led effort. Here’s the piece:  http://online.wsj.com/article/SB124338405214956695.html  Continue reading…

Latest Update: It has now emerged that North Korea tested three short-range missiles today in addition to a nuclear device which it detonated underground (which was initially detected as an earthquake; see below.) Markets continue to take the news in stride, with South Korea’s won the main victim and the yen also under pressure, given Japan’s proximity. (That said, markets are thin today because the U.K. and U.S. are on holiday.) Does this relatively unusual cluster of test firings/detonations mean North Korea’s neighbors are in greater danger than before? In the recent past, North Korea has tended to conduct such tests in isolation. The country’s first and only other known nuclear device test was in October 2006, according to DJN. Pyongyang claims today’s device was bigger than the first. A long-range missile was tested in April. At the time, North Korea described it as a “satellite” but various governments identified it as a missile. As governments roundly condemn today’s developments, arms control experts will surely puzzle out the deterrance issue in the context of a political transition under way in North Korea. This WSJ story by Jay Solomon, Evan Ramstad and Peter Spiegel is very illuminating: “North Korea Plans Kim Succession, U.S. Believes.” http://online.wsj.com/article/SB124304434715249127.html

Earlier Update: North Korea has also test-fired a short-range missile. The WSJ says a statement from the country’s state-run media refers to the government’s ”military first” policy, which is known as Songun. This would seem to support analysts’ views that the North Korean military’s power is on the ascent.

Earlier: DJN’s flashing news that North Korea may have tested a nuclear device.  It appears the nuclear test caused rumblings so strong that the U.S. Geological Survey tentatively detected a temblor registering 4.7 on the Richter scale. South Korea’s Yonhap news agency says the Seoul government detected an “artificial earthquake” – suggesting the quake was actually the aftermath of a North Korea nuclear test. The  Kospi (Korean stock market index) slid as did the won. The Korean stock exchange is now halted. Continue reading…

Korea’s Kookmin Bank is aiming to sell Asia’s first-ever covered U.S. dollar bond, DJN’s Ditas Lopez reports. S&P and Moody’s are rating the covered bond higher than they rate the bank itself. This is because the bond is backed both by Kookmin – its ability to repay borrowers – as well as a pool of collateral in the form of  credit card and home mortgage obligations.  Europeans are familiar with covered bonds but they’re still rare in the U.S.  Continue reading…

Just out today: machinery orders in Japan came in better than expected in February. These are a key gauge of industrial health in the world’s second-biggest economy, and the monthly data has been very, very bad – until now. Orders broke a record four-month stretch of declines, climbing a seasonally adjusted 1.4% in February from the previous month. Economists had forecast a 7.9% decline, DJN reports. Also today, Japan is unveiling another economic stimulus package, and both the machinery orders and the stimulus have given a nice boost to the Nikkei stock index. Over in Korea, the central bank declined to lower interest rates today, signaling to many that it, too, is seeing green shoots of recovery. Among other things, South Korea had its largest monthly trade surplus ($4.6 billion) in March, and in February industrial output rose for a second straight month (up 6.8%.) Korea’s big government bond was oversubscribed by far and priced overnight, easing concerns about the country’s ability to roll over foreign debts due this year, DJN reports. In Malaysia, industrial output shrank less sharply in February than January and could signal that economy’s manufacturing sector has bottomed out. On the downside, Australian unemployment surged to a five-year high, and as DJN’s James Glynn writes in a “Money Talks” column, the Reserve Bank of Australia may have a bit of room to ease rates – albeit by “tapping” rather than slamming on the breaks as that country’s economy begins solidifying.