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.

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Australia’s central bank, surprisingly cutting interest rates 25% (most people expected either no cut or a solid 50% whack), says it sees “tentative signs of stabilization in several countries, including China.” Yay! Happy days and all that, likely spurred by recent data showing Beijing’s stimulus spending is making a difference. As I noted yesterday, new bonds from Asian companies are selling briskly. Hutchison Whampoa’s new $1.5 billion 10-year global bond priced late Monday. Today DJN reports the Korean government is proposing big global bonds to raise around $2 billion. (All this said, bond spreads are generally wider today, reflecting jitters about the American banking industry that surfaced Monday U.S. time.) Back to Oz: The Reserve Bank of Australia’s post-rate cut comments show it remains concerned about the domestic economy even as it assumes what DJN reporter James Glynn describes as “a more neutral policy stance.” (The shift to neutral appears driven mainly by the central bank’s optimism about Beijing’s economic stimulus measures – China being Australia’s biggest trading partner.) Some bank economists predict more RBA rate cuts in coming months, punctuated by pauses. It’s worth noting that at 3.00%, the Australian cash rate target is now at a 49-year low.

Japan’s currency is unquestionably on a weakening trajectory. Where it stops, nobody knows, and nobody really cares because it’s good news for the declining Japanese economy. And what’s good for Japan’s economy is good for makers of all the goods Japanese consumers buy.  Only thing is, it’s hard to visualize how a weak yen will translate into concrete economic growth as the currencies of other export-dependent economies likewise decline. Non-yen revenues (such as those generated in the U.S. and Europe) stated in yen terms in corporate earnings statements will look awfully pretty. Prettier balance sheets should give Japanese companies the wherewithal to maintain employment and capital expenditure levels.  But Japan’s companies face a mighty foe: the woeful won. Korea’s weak currency gives that country’s corporate sector, especially its auto, electronics and steel manufacturers, a big advantage. That edge could continue giving Japan Inc., and Japan’s economy, a lot of grief even as the mighty yen falls further.