World economy talk

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Di lang Nikkei....

Asian shares outside of Japan also retreated after they got their first chance to react to Federal Reserve chairman Ben Bernanke’s comments that monetary stimulus could be scaled back.

Mr Bernanke said the Fed could start slowing the pace of its $85bn-a-month asset purchases “in the next few meetings”, but only if the employment market showed sustained improvement.

The minutes of the Fed’s last meeting, revealed shortly before Mr Bernanke spoke, showed a “number” of officials were ready to start tapering off the central bank’s third round of quantitative easing as early as June.

Further pressure on markets came from news of China’s slowing manufacturing activity. The flash HSBC purchasing managers’ index for May fell to 49.6 from 50.4 in April, the first contraction in seven months. Later, PMI data for the eurozone was marginally better but still pointed to the bloc’s economy contracting in the second quarter.

The Shanghai Composite dipped 1.2 per cent, the Hang Seng index fell 2.5 per cent and the ASX 200 in Australia lost 2 per cent
.
The FTSE All-World equity index, which this week hit a near five-year intraday high of 252.0, is down 1.2 per cent on the session to 245.9 as the FTSE Eurofirst 300 endures a 1.9 per cent loss and US index futures suggest the S&P 500 will slip 11 points to 1,644.

Across asset classes the mood has shifted to “risk off”. Growth-focused products are stumbling following the China data, with copper off 1.9 per cent to $3.31 a pound and Brent crude falling 65 cents to $101.95 a barrel. “Commodity currencies” are in retreat, at one point pushing the Australian dollar to a multi-month low of $0.96.

The corollary is the movement of funds into some perceived havens. Ten-year US Treasury yields are down 5 basis points to 1.99 per cent, while gold is up $25 to $1,393 an ounce.

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Hehehe...

http://www.interaksyon.com/business/...man-sachs-says

Philippines may no longer have best-performing market in 2H, Goldman Sachs says
By: Likha Cuevas-Miel, InterAksyon.com
May 23, 2013 4:48 PM

MANILA - The Philippines may no longer have the best-performing stock market in the second half of the year since other bigger and less expensive bourses in Korea and China could enjoy a surge as the global economy picks up, Goldman Sachs said.

In a briefing on Thursday, Goldman Sachs chief market strategist Christopher Eoyang said the Philippines has a good story that attracts investors.

But equity valuations have become too expensive, given the limited liquidity and number of assets available for investors, he said, citing the Philippine Stock Exchange's price-to-earnings ratio of 21, which is 80 percent more than the regional average.

In contrast, Korea's stock market is trading at six times earnings, whereas China and Indonesia are trading at eight percent and 15 percent, respectively.

This means the local market is already discounting a nominal gross domestic product (GDP) growth rate averaging 12 percent for the next decade, higher than Goldman Sachs' forecast of nine percent.

For the first quarter, the investment bank is keeping its 5.5 percent forecast. The drivers would still be domestic demand and private investment.

"The markets are pretty happy but it [Philippine market] -- and we're not saying it can't happen -- may be discounting a little bit. It is even more incumbent for the government and the corporate sector to deliver results," Eoyang said.

"Your ability to make money is the difference of what market has been discounting and what actually happens," he said.

Another big concern bugging investors is the limited liquidity of the Philippine market, which averages $270 million a day -- half of Malaysia and Indonesia and one-eighth of Thailand, which trades at $2 billion a day.

Investors are frustrated by the illiquidity and "crazy valuation" of PSE-listed firms, Eoyang said.

"We would argue that the Philippines is still in the early stage of the deepening of the markets process," he said, adding that it would be listing more companies, which in turn increases free floats. Add to that "generational shifts" happening in local firms.

These factors would help foreign investors gain more access and the market capitalization of these companies would rise, evening out valuations to more reasonable levels, Eoyang said.

When that happens, "people can still still get access to the one of the best stories in emerging markets," he said.

"But there's a lot of work to do and so I think the process of capital markets deepening is a little bit will be incumbent on the corporate sector and as well the government to facilitate this," he added.

Goldman Sachs has advised clients to go underweight on the Philippines because of these issues and because of the presence of more attractive markets.

North Asia -- Japan, China, Taiwan and Korea -- are more attractive at this point as these are more attuned to global cycles and thus would be able to ride quickly on the US-China recovery, Eoyang said.

"We're not saying that we're not negative on the Philippines [but] we're saying if it will go up but it won't be the best performing given the valuations and the macro backdrop," he said.

Given these factors, it would be very difficult for the PSEi to hold on to valuations of above 20 after the second semester, he added.

Proposed public float hike

Goldman Sachs said the Department of Finance's plan to increase further the minimum public ownership in listed companies is "clearly a good thing" in the long run but may upset the market if it happens quickly.

Increasing the minimum public float provides more opportunities for investors but has "implications" for the companies involved, Eoyang said.

"It has to be gradual process. Capital markets don't like huge changes all at once. You have to make sure that they digest things. Investors are quite worried going from 10 to 20 percent in a short period of time because it's like, that overhang limits potential investment," he said.

He said a good number for a minimum public float is 20-30 percent, which would give real exposure for the investor and "really efficient" market at around the stock's price.

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the most popular trade in the world is unwinding

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the most popular trade in the world is unwinding

Japanese Shares Drop Led by Exporters as Yen Strengthens - Bloomberg

Japanese shares fell, with the Topix (TPX) Index extending the biggest weekly decline since August 2011, as the yen strengthened to the 100-level against the dollar after Bank of Japan Governor Haruhiko Kuroda said the country could withstand higher interest rates.

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foreign funds take profits

sell stocks


buy dollars

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Japan 10 yr yield 0.91%

rising JGB yield keeping USDJPY rally in check

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AUD getting killed

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king dollar!

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USDJPY lower

S&P 500 futures lower

risk off in Europe

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USD lower against CHF, JPY, NZD, EUR, GBP, CAD

USD selloff due to profit taking

investors are long USD

CFTC: Hedge funds the most dollar bullish since last June | Tradingfloor.com

Hedge Funds seeking currency exposure through the use of IMM currency futures were buyers of dollars again for a fourth week during the one ending May 21, according to the latest data from the US Commodity Futures Trading Commission. All currencies apart from CAD were sold, especially the euro while the net-short in GBP reached a new record high. The combined dollar position against the eight currencies rose by 38 percent to US 34 billion, the highest since last June.

time to cut positions

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Philippines ETF

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it's all about the yen

when the yen strengthens stocks fall

USDJPY below 101

Nikkei now -5%

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PSEi crashed 275 points down, below 7,000. Asia United Bank (AUB) below IPO price at 94.30...

Philippines' surprisingly strong first-quarter growth eclipses China

By Karen Lema
MANILA (Reuters) - The Philippines on Thursday posted surprisingly strong growth in the first quarter, knocking China from pole position in Asia, driven by robust domestic consumption and government spending.

The stellar pace of expansion, which blew past expectations, pulled the peso up from an 11-month low and cemented views the central bank would leave its key policy rate on hold this year.

Growth is seen powering on after the Philippines earlier this month got an investment grade rating from Standard & Poor's, the second debt agency to do so this year. That lowers borrowing costs and helps to attract foreign capital for an economy mired with high unemployment and poverty.

First quarter GDP grew a seasonally adjusted 2.2 percent over the prior three months, the fastest clip since the first quarter of 2012. A Reuters poll of economists had forecast 1.6 percent growth.

From a year earlier, the economy grew 7.8 percent, helped by robust domestic spending, making the Philippines the fastest growing economy in Asia as it pushed past China's 7.7 percent annual pace and 1.6 percent quarterly growth.

At a time when several regional central banks have cut rates to bolster growth, economists said the Philippine central bank would most likely leave its key overnight borrowing rate on hold for the rest of the year. Inflation is forecast to stay within the central bank's 3 to 5 percent target band this year despite strong growth.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said he did not foresee the inflation target being breached over the policy horizon despite strong GDP growth.

The central bank next meets to review policy on June 13. It has kept its policy rate steady at a record low of 3.5 percent since December 2012, but has slashed the rate on its special deposit account (SDA) facility by more than 200 basis points since July 2012 to divert credit to more productive use.

"We think the BSP will continue to cut the SDA rate to lift domestic spending as well as save costs," said Trinh Nguyen, economist at HSBC in Hong Kong. The central bank has incurred heavy losses as the SDA facility attracted huge liquidity.

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wow this is big

Exclusive: Japan public pension mulls shift after stock rally - sources | Reuters

(Reuters) - Japan's public pension fund - a pool of over $1 trillion - is considering a change to its portfolio strategy that could allow its investment in domestic stocks to grow with a rallying market, according to people familiar with the deliberations.

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Japan Stock Futures Rise After Nikkei Enter Correction - Bloomberg

Japanese stock-index futures rose following a report that the nation’s pension fund may boost its equities holdings, indicating the Topix index and Nikkei 225 Stock Average (NKY) will rebound after entering corrections yesterday.

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but the rally can't be sustained



coz USDJPY aint rallying



it's all about the yen

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testing

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good morning

market driver USDJPY below 101

nikkei down more than 300 pts

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tons of money flowing out of emerging markets

money was driven into EM the last few years in search of yield coz of low yields in developed markets (coz of central bank monetary policy)

the US economy is now improving so the Fed can reduce monetary stimulus soon

the US 10 yr is already reacting to that expectation



rising US bond yield will stop the search for yield in EM

the search for yield resulted in massive dollar inflow into EM which strengthened EM currencies

now EM currencies have fallen against the USD

the outflow is taking place