Você está na página 1de 11

News Summary

Hello from Hong Kong. Kicking off with speeches from


Central Bankers.
China markets reopen on Monday with plenty attention on
where the local currency fixing and onshore spot levels.
China will also publish their January trade estimated to be
somewhere near US$58bn from US$60.9bn. Speaking to
Caixin magazine, PBOC Governor Zhou Xiaochuan said
speculators should not be allowed to dominate market
sentiment regarding China's foreign exchange reserves and it
was quite normal for reserves to fall as well as rise. Zhou
said Yuan exchange reform would help the market be more
flexible in dealing with speculative forces and there was no
basis for the Yuan to keep depreciating, and China would
keep the Yuan basically stable versus a basket of currencies
while allowing greater volatility against the Usd (page 9/10).
BOJ Deputy Governor Hiroshi Nakaso said Japanese
government needs to do more to boost Japans potential
growth. Now that the Bank of Japan has taken monetary
easing one step further...I think that the original third
arrow of Abenomics, the growth strategy, must also fly
faster, he said (page 10).

From the Sunday Times: Nearly every European bank is now


locked out of the long-term funding market; nervous lenders
want a high price in return for their money. The funding
drought wont bring down a bank immediately it would
have to last for a year or more. Another thing rattling the
banks is negative interest rates. The lower they go, the
harder it is for them to make money (page 3).
In Irwin Stelzers American Account, he wrote there are two
factors are intersecting to cause the fear factor to mount
and traders to dash for the exits. Firstly, a US political
climate that is frightening, to say the least; second, negative
interest rate policies that are squeezing the profits of
European banks, driving down their shares by about 20% this
year. Negative interest rates are a good way of persuading
people and businesses that something must be badly wrong
(page 7).
US markets are closed on Monday for Presidents Day and
plenty of Fed speakers this week.
Have a good one ahead.

ECB Executive Board Member Benot Curs interview with


Rheinische Post was published on Saturday. Cur said
European banks are in much better position today than they
were at the height of the debt crisis in 2011 and 2012. One
challenge they face is their low profitability, which is also
related to the current level of economic growth. Some banks
have a high level of non-performing loans on their books. On
interest rates, Cur said rates will have to stay low until
the inflation rate in the euro area is moving towards
objective of just below 2%. But we are a long way from 2%
inflation because of the low oil price. The ECB will have to
lower its inflation forecast. If necessary, ECB stand ready to
use all of the instruments at its disposal. On Greece, he said
it is in the interest of the Greek people that their economy
becomes stronger, irrespective of the refugee issue. For
example, Greece must in any case sustainably reform its
pension system. Greece must stick to the agreement
reached in August 2015 (page 4).
Meanwhile,
newspapers
reported
thousands
of
demonstrators gathered in Athens on Friday and Saturday in
protest over a pensions overhaul (page 5).
Former Bank of England MPC Member Andrew Sentance said
job of central bankers and senior economic policymakers
should be to encourage us to focus on the underlying
economic position - unfortunately; they have come across as
doing the opposite. Investors in financial markets, however,
are adopting a glass is half-empty philosophy, rather than
thinking of the glass as half-full. The perception is that the
world economy is weaker than it truly is (page 2).
Sunday Telegraph published an article that investors now
believe there will not be a single interest rate rise from any
of the G7 group of central banks this year, while the number
of expected rate cuts this year has increased from zero to
six. The article also said market does not expect Fed Res to
move again this year. Traders are wary, however, that Mario
Draghi, the ECB president, could disappoint in the same
fashion that he did last December (page 3).

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

World News
Andrew Sentance: Investors, the best thing you
can do is ignore Osborne, Carney, Yellen and
Lagarde
Taken from the Telegraph Saturday, 13 February 2016

The job of central bankers and senior economic


policymakers should be to encourage us to focus on the
underlying economic position - unfortunately; they have
come across as doing the opposite
It has been another torrid week on global stock markets. On
Monday morning, the FTSE 100 index was hovering around
5,850. By Thursday it had dropped to just above 5,500 (6pc
down) though it has closed the week a bit higher. Weve seen
a continuation of the stock market decline which started last
summer, wiping about 20pc off the value of the top UKquoted companies.
Four ingredients are contributing to this latest period of
stock market turmoil. The first is the weakness of oil and
commodity prices. Energy and mining companies are heavily
represented on the UK stock market. Companies such as
Shell and Anglo American have seen big share price declines
over the past year. By contrast, the share prices of
companies involved in manufacturing, services and
construction the activities which make up more than 90pc
of UK employment and GDP have been much more stable
over the past year, or even risen
The second negative factor has been worries about the pace
of global growth, with the Chinese economy slowing and big
commodity-producing economies like Russia and Brazil in
recession. But as I argued in this column last week, these
fears have been overdone, and there is the prospect of
better growth in other parts of the world economy,
especially Europe. Investors in financial markets, however,
are adopting a glass is half-empty philosophy, rather than
thinking of the glass as half-full. The perception is that the
world economy is weaker than it truly is.
The third ingredient is a new bout of concern about the
strength of the banking system. There are worries that banks
could find themselves hit by another wave of bad debts
either because of lending to energy producers, like US shaleoil producers, or to governments that depend heavily on oil
revenues, like Venezuela, Russia, Nigeria and countries in
the Middle East. Banks are also heavily weighted in the FTSE
100 index, so these financial concerns have a
disproportionate impact on our main measure of the UK
stock market.
The fourth issue fuelling this cocktail of negativism is the
state of global monetary policy. In economies that have been
recovering well like the UK and the US central banks have
been reluctant to raise interest rates. Elsewhere in the
eurozone, Japan and Sweden central banks have
introduced negative interest rates. Negative interest rates
are untried and untested and may make the problems in the
banking system worse, not better. So it is not surprising that
stock markets are responding badly to them. It smacks of
desperation and also undermines the very thing central
banks are meant to protect the value of money held in the
banking system.
As Allister Heath rightly pointed out, this problem with
central banking has deep and long-standing roots. We have
relied for too long on a world of easy money. The monetary
ammunition is all spent, with interest rates on the floor and
quantitative easing no longer effective.
So how worried should we be? Nobody likes to see the value
of their share portfolio or their pension eroded by tumbling

stock markets. But the bulk of these stock market worries do


not reflect what is happening in the real economy.
Here in the UK, economic growth continues at a steady if
not spectacular pace. According to the latest CBI forecast
released last week growth will be 2.3pc this year, followed
by 2.1pc next year. Our own PwC forecasts are very similar.
These forecasts for 2016 and 2017 are higher than the
average 2pc growth we have achieved so far in the recovery.
The unemployment rate here in the UK is only just above 5pc
and we have a record number of people working in our
economy. There are two Western economies that are larger
than the British economy the US and Germany. Both have
unemployment around 5pc and are growing reasonably well.
Inflation is around zero and wages are rising at 2pc to 3pc.
This means consumers in the UK and most Western
economies are seeing living standards rise and should be
prepared to increase their spending.
There are sound economic fundamentals underpinning our
recovery, contrasting with the extreme nervousness of the
stock market. But which is giving us the best indication of
what will happen in the future?
Paul Samuelson, who won the Nobel Prize in Economics in
1970, once joked: The stock market has predicted nine out
of the last five recessions." In fact, the record of the stock
market in recent times has been much worse than that.
Before this latest bout of volatility, we have had big stock
market declines or corrections on seven occasions in the past
30 years: 1987, 1994, 1997, 1998, 2001-3, 2008 and 2011.
Only one of these was associated with a major recession
the global crisis in 2008.
Sometimes large financial disturbances create or contribute
to recessions, which happened in 1974 and 2008. But our
other two major recessions in the early 1980s and early
1990s were not associated with a big stock market
correction. There is a lot of other volatility in share prices
which is just noise in the system.
Against this noisy background, the job of central bankers and
senior economic policymakers should be to encourage us to
focus on the underlying economic position. Unfortunately,
they have come across as doing the opposite, offering an
amplifier for economic and financial volatility. Janet Yellen,
the chairman of the US Federal Reserve, is the latest leading
economic figure to warn about downside economic risks,
building on similar statements from George Osborne, Mark
Carney and Christine Lagarde of the IMF. Is it any surprise
financial markets are so nervous?
We should be warned of serious risks to our economy. But we
also need leading central bankers and policymakers to
provide a clear guide to the future and to demonstrate they
are in control of events. That has not been happening
enough recently and it has contributed to the latest bout of
stock market volatility.
(Full article click - Telegraph)
---

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Alarm bells ring as banks are denied long-term


funding
Taken from the Sunday Times 14 February 2016

LISBON is not an obvious place to start looking for the cause


of whats happening to the big European banks. Their shares
are being pummelled, and in the case of Deutsche Bank, as
our chart shows, last week fell to levels not seen since the
early 1980s.
The Portuguese capital is home to Novo Banco, which got
into trouble last month. As part of the rescue the
government decided to impose about 2bn (1.5bn) of losses
on senior bondholders.
This was a big shock to the owners of the bonds, who said
the move was an obvious breach of Europes new rules on
how struggling banks should be bailed out. Investors are now
understandably nervous about bank bonds which helps to
explain the panic last week when some reports suggested
Deutsche might struggle to make interest payments on its
bonds. If European governments cant be trusted to follow
the rules when banks are struggling, its time to head for the
exit.
Deutsche can make the payment, but there is a bigger
underlying problem. Nearly every European bank is now
locked out of the long-term funding market; nervous lenders
want a high price in return for their money. The funding
drought wont bring down a bank immediately it would
have to last for a year or more but the European Central
Bank (ECB) and the Bank of England must be alert to the
danger. Both institutions have repo programmes in place
that can push money to banks in times of stress. It might be
time to fire them up.
Rates in the danger zone
ANOTHER thing rattling the banks is negative interest rates.
The lower they go, the harder it is for them to make money.
Hopefully none of the bank bosses has read a note from
economists at JP Morgan, out last week, suggesting that
rates could go much, much lower than anyone expects and
that they might need to fall to -4.5% to have much of an
effect.
In Britain we are still in positive territory, but the ECBs
deposit rate is already negative (-0.3%).
Mario Draghi, the boss of the ECB, is widely expected to drop
the rate even further next month. Bank chief executives are
praying he doesnt.
(Full article click - Times)
---

2016. Now, after a turbulent week for global stock markets,


investors believe there will be no moves at all this year.
The big swing in expectations comes after world stock
markets fell into bear market territory, as money
managers fled from stocks to safe haven assets such as bonds
and gold. Theres just so much gloom about everything at
the moment, said Dario Perkins, an economist at Lombard
Street Research.
Central banks have cut their rates 637 times since the
collapse of Bear Stearns in March 2008. They have also
purchased a combined $12.3trillion (8.5trillion) of assets,
according to Bank of America Merrill Lynch.
There were no expectations at the beginning of the year
that the European Central Bank would cut interest rates. But
now traders believe it will actually reduce its rates, which
are already below zero, a further three times. Cuts are also
expected from Japan and Canada.
Traders are wary, however, that Mario Draghi, the ECB
president, could disappoint in the same fashion that he did
last December, building up anticipation stimulus before an
ECB policy meeting, and then failing to deliver. Mr Draghi
cant not deliver at the ECBs next meeting, Mr Perkins
said.
The Federal Reserve, which raised its rates for the first time
in nearly a decade last December, is now stuck. Economists
at BNP Paribas consider it locked out, unable to continue
increasing its rates until 2018: We see the Fed as trying to
manage a retreat in an orderly fashion, while hoping for the
best. We do not think the best will materialise.
Luke Hickmore, an investment manager at Aberdeen Asset
Management, said: The only debate thats worth having is
whether this is the start of another financial crisis. It
probably isnt but financial markets are a seething ball of
fear that it is.
The big factor in whether this market volatility feeds
through to the broader economy is central banks. If they do
nothing, and we see rising unemployment and consumers
spending less, then we could be in trouble.
Its worth nothing how utterly silent politicians have been.
Once again, central banks are being hung out to dry.
Analysts said that it would take a global response to trigger a
change in sentiment, of the kind that markets have begun to
expect from central banks. Watch out for the G20 finance
ministers and central bank governors meeting on February
26 and 27 in China, said Danske Bank.
(Full article click - Telegraph)

Major central banks tear up interest rate plans


as market turmoil forces them into reverse
Taken from the Sunday Telegraph 14 February 2016

Carnage in financial markets forces G7 central banks to put


rate rises on hold and raises prospect of further cuts this
year
The worlds most powerful central banks will be forced to
tear up their plans following the carnage that has engulfed
financial markets since the beginning of the year.
Investors now believe there will not be a single interest rate
rise from any of the G7 group of central banks this year,
while the number of expected rate cuts this year has
increased from zero to six.
The data, compiled by Danske Bank analysts, suggests
investors believe monetary policymakers could slash rates
and pump up their quantitative easing programmes in a bid
to stabilise the economic outlook.
Carefully laid battle plans to start tightening monetary
policy have been left in tatters.
At the beginning of the year the market was pricing in the
possibility of two rate hikes by the US Federal Reserve in
These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

European News
Cameron Says He Believes Britons Would Vote
to Stay in EU If Bloc Agrees to Changes
Taken from the WSJ Saturday, 13 February 2016

Prime minister asks for concessions while France and Poland


express concerns about draft deal
British Prime Minister David Cameron on Friday said he
believes U.K. voters would decide to stay in the EU if the
concessions he wants were secured, as part of a final push to
complete a deal with other European Union leaders on his
demands for a changed relationship.
We have always been a country that reaches out, Mr.
Cameron said, after a meeting with German Chancellor
Angela Merkel in Hamburg, Germany. And I never want us to
pull up the drawbridge and retreat from the world.
Mr. Camerons speech, less than a week away from a
meeting in Brussels where he will seek approval from fellow
EU leaders for his proposals, came as officials from France
and Poland expressed concerns about the draft deal. Mr.
Cameron has pledged to renegotiate the U.K.s relationship
with the EU ahead of a referendum, which could come as
soon as June.
Polls have shown Britons are split on whether to stay or
leave, though generally more say theyd vote to remain in
the union.
Among the changes he hopes to secure are ones that would
limit the access of benefits paid out to migrants to the U.K.
as part of a broader goal of curbing migration.
Polish Prime Minister Beata Szydlo said Friday that there
were sticking points in the draft proposals and that the
security of Polish workers in the U.K. is an outstanding
problem.
We still need to talk about that, Ms. Szydlo said during a
visit to Berlin.
Meanwhile, French Finance Minister Michel Sapin said his
government also continues to seek clarifications about extra
rights, regarding pending legislation, requested by Mr.
Cameron for countries outside the eurozone in relation to
the bloc.
We have two concerns: Nothing should block a deepening of
the eurozone, even if its legitimate to increase dialogue
with non-euro countries, Mr. Sapin said. The other concern
is Britains powerful financial sector possibly getting
exemptions or benefiting from special rules that would
undermine the single market.
The single market, including the financial market, is for 28
members. You can have different rules in the U.K., but to
the same effect, because otherwise we create silos and its
no single market anymore, Mr. Sapin said after a meeting
Friday of EU finance ministers in Brussels.
He said he hopes the necessary clarifications will be added
to the text before the summit, which starts Thursday. Its
our objective to get a deal at the summit, I hope there will
be a deal, he said.
Ms. Merkel reiterated her support for the U.K.s continued
membership in the EU, but said she wouldnt accept any
dilution of the unions core principles, such as the freedom
for EU citizens to travel and work anywhere in the bloc.
Mr. Cameron emphasized the close relationship between
Britain and Germany and said he wants to keep Britain inside
a reformed European Union.
(Full article click - WSJ)
---

ECB Benot Cur Interview with Rheinische


Post
Taken from the ECB Saturday, 13 February 2016

Share prices are sharply down on the worlds stock


markets. Why?
There are several compounding factors, each calling for
different answers. First, its a global phenomenon. Investors
are generally anxious about a slowdown in growth
worldwide, especially in the emerging markets, and above
all in China. Second, theres great uncertainty about the
global effects of the low oil price. Initially, it was thought
the low price would be good for global growth, but now
some negative effects can be seen, particularly in emerging
markets. Third, market participants are questioning how
profitable banks are and whether they have successful
business models for the future.
How affected are Europes banks?
They are in a much better position today than they were at
the height of the debt crisis in 2011 and 2012. Thanks to the
banking union they are now much more resilient. They have
very significantly built up their capital and liquidity. One
challenge they face is their low profitability, which is also
related to the current level of economic growth. Also, some
banks have a high level of non-performing loans on their
books, as a legacy of the crisis. None of these challenges are
new: they have been clearly identified, they require forceful
action and they will be solved over time.
What about Germanys banks? Deutsche Bank and
Commerzbank have lost a lot of trust.
I cant talk about individual banks. Generally speaking,
European banks are in a transitional phase and are
rethinking their business models, also concerning
technological developments. They also face a new regulatory
environment. We have had a new framework for the
resolution of banks only since the beginning of January.
Together with the single supervision, this system will make
them stronger and better protect taxpayers, but banks and
investors are still learning about it.
Is a new financial crisis more likely?
No. Today in the euro area we have economic growth of
between 1% and 1.5% and accelerating, while a few years
ago it was negative. This growth is helping the banking
sector to recover. Provided we stay on this path Im
optimistic that the crisis will not return.
Low interest rates and rising share prices normally go
together. Why is this mechanism no longer working?
As explained earlier, there are other reasons for the recent
market movements. Looking back over a longer period, the
low interest rates have clearly given a boost to stock
markets.
How much longer will the period of low interest rates last?
As long as needed. Rates will have to stay low until we see
that the inflation rate in the euro area is moving towards our
objective of just below 2%. We at the ECB dont want this
phase of low rates to become normality either. But we still
have a pressing need for the low rates so as to get inflation
firmly back to 2% and to protect the euro area recovery.
But we are a long way from 2% inflation because of the low
oil price. The ECB will have to lower its inflation forecast.
Our next staff inflation projections are due in March. Already
in January we said that inflation will only very slowly move
back towards 2%. Compared with the situation in December
we are seeing new downside risks. The main causes are the
falling price of oil and a decline in global growth. In the past
few days we have also seen greater volatility on the
financial markets. If that continues for too long, it can also
increase the risk of a rise in inflation being delayed.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

The continued low interest rates are unsettling savers,


especially in Germany. Whats your advice to savers?
We have to get inflation to below, but close to, 2% again;
that has been our definition of price stability for a long
time. Why are interest rates so low? Because the return on
capital has declined in the economy. To keep the low
interest phase as short as possible we need more private
investment as well as government policies which create the
conditions for profitable projects to emerge. Meanwhile we
can help savers best by keeping policy interest rates low.
Do governments have to do more to protect savers from
losses in the value of their assets, for instance by cutting
taxes?
Our advice to euro area governments is to use the savings
gained from the lower cost of debt refinancing in a growthfriendly way to help their citizens. They could, for example,
reduce taxes on labour, create more incentives for private
investment, or reduce their deficits where required. In many
euro area countries the investment climate is too
unfavourable.
Does the ECB need to become even more expansionary in
order to prevent deflation?
This depends a lot on global developments. If necessary, we
stand ready to use all of the instruments at our disposal.
That includes the key interest rates and the size,
composition and duration of our securities purchases. We
will take a decision on this in March.
How will the ECB ever manage to move away again from
its expansionary monetary policy?
Technically speaking, its not hard to do. The US central
bank is currently demonstrating how its done. What is more
important is that our environment and by that I mean
government policies should support us sufficiently in
generating more growth. If this does not happen, we will
have to keep rates low for a very long time. So its not just
up to us whether the low interest rate phase can be brought
to an end, it also depends on the pace of reform in euro
area countries.
But the refugee crisis means that were also facing a new
challenge right now. Is this going to affect economic
developments?
It is a huge challenge, not only in Germany, but for Europe as
a whole. But the refugee crisis is also a great opportunity for
Europe if the refugees can be successfully integrated into
the labour market. The more Europe stands together in the
refugee crisis, the greater is the likelihood that it can be
overcome. As a European citizen, I believe that we are now
at a historic moment when the EU must demonstrate that it
is able to reach a European solution.
Is that realistic?
Europe has already overcome similar situations, for example
during the debt crisis. In this case, given that we are talking
about millions of people who are fleeing to Europe, I
personally believe that the EU has a moral obligation to find
a joint European solution. The European project is not first
and foremost a financial project. Europe always was, and
will continue to be, about bringing people together, not
about dividing them.
The euro area countries cannot even agree on whether or
not there should be a common limit on payments in cash.
What would you advocate?
This is a matter for the EU finance ministers to decide on,
not the ECB. There are countries in Europe where cash is
very important, and there are others where cash plays a
lesser role.
But the ECB is responsible for withdrawing the 500 note.
We have direct responsibility for this because of course we
print the banknote. The ECBs Governing Council is currently

considering very carefully the question of whether or not to


withdraw the 500 note. We hear from the competent
authorities that the 500 note is increasingly being used to
finance terrorism and launder money. We take this warning
very seriously in the Governing Council.
What is your personal view?
Personally I think that we now have fewer reasons for
keeping the 500 note than we did when the euro was first
introduced, because electronic payments have become much
more important. We have been told that the banknote is
increasingly being used for criminal activities. Thats why I
believe that the 500 banknote will eventually be
withdrawn, but it has to be done carefully. Let me
emphasise that this does not mean that we should do away
with cash in general. Cash is crucial in our everyday lives. So
even if the 500 note no longer exists, people will still be
able to use all of the other banknotes. Given the high
importance of cash for the citizens, there is no discussion
whatsoever about getting rid of it in general.
Greece is under strain from the thousands of refugees
who arrive on its shores each day, and it is also going
through a severe crisis at the same time. Is the refugee
crisis weighing on Greeces recovery?
We should not mix up the question of whether Greece will
meet the requirements of the third financial assistance
package with the refugee issue. It is in the interest of the
Greek people that their economy becomes stronger,
irrespective of the refugee issue. For example, Greece must
in any case sustainably reform its pension system.
What is your view of the progress made on reforms in
Greece?
The experts from the European Commission, the ECB and the
International Monetary Fund (IMF) had productive discussions
in Athens, but we are not yet where we want to be. It is no
longer about the fundamental aims, it is about the
implementation. On this, Greece must stick to the
agreement reached in August 2015 on the third assistance
package. And at the ECB we want the International Monetary
Fund to continue to support this initiative.
When will the Greek crisis be over?
The Greek crisis is over provided that everyone sticks to the
commitments made last summer.
(Full article click - ECB)
---

Fresh protests in Athens over pension reforms


Taken from the Kathimerini Sunday, 14 February 2016

Thousands of demonstrators gathered in Athens on Saturday


in solidarity with farmers who have blocked dozens of
highways and border crossings in recent weeks in protest
over a pensions overhaul.
An estimated 12,000 people gathered in the Greek capital's
central Syntagma Square outside parliament, police said.
More than half were members of the communist-leaning
PAME trade union, offering support for the huge wave of
farmers who arrived in Athens from the countryside Friday to
protest against the reforms.
On Friday evening, around 10,000 protesters waving black
flags, including thousands of farmers, marched through
Athens behind a column of tractors blaring their horns.
Earlier Friday, protesters had clashed with police in front of
the agriculture ministry and on a motorway outside the city.
Vowing to keep up the protests throughout the weekend,
dozens of farmers spent Friday night camped out in
Syntagma Square, lighting a fire in front of parliament.
The farmers are angry about government plans to increase
their social security contributions as part of pension reforms
demanded by Greece's creditors in exchange for a third
massive bailout agreed last year.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Widespread opposition to the reforms has led to the rare


sight of professionals marching alongside blue-collar workers
in recent weeks, a phenomenon that has been dubbed the
"necktie movement".
Farmers also reject plans to scrap benefits such as cheaper
fuel and double their income tax by 2017 as the debtwracked Greek government tries to replenish its coffers.
(Full article click - Kathimerini)

News Americas
Succession spat lifts the lid on wacky hedge
fund titan
Taken from the Sunday Times 14 February 2016

Ray Dalios management methods include hiring CIA experts


to gather data on his employees
WHEN traders at the worlds biggest hedge fund feel angry or
frustrated, they are instructed to hit the Pain Button. It is an
app on their staff iPad that records negative feelings.
Over the past 10 days, pain levels have reached new highs at
the secluded woodland headquarters of Bridgewater
Associates amid a public spat between its billionaire founder
Ray Dalio and his presumed successor Greg Jensen.
A week last Friday, senior staff were asked, in effect, to vote
on who they trusted more Dalio or Jensen. Dalio accused
Jensen of talking about him behind his back, a cardinal sin
according to Principles, his 123-page treatise that governs
behaviour inside the firm. Jensen accused the 66- year-old
tycoon of failing to honour a promise to hand over power.
Although the outcome of the vote is unknown, it has
emerged that Jensen, 42, is likely to give up his managerial
responsibilities and return to simply looking after money.
In the bizarre office world of Bridgewater, this is simply how
things get done.
The founder is the most successful hedge fund manager in
history, creating $45bn (32bn) of gains for his investors
more than even George Soros or Dalios art-collecting
neighbour Steve Cohen, boss of SAC Capital Advisors.
That success, Dalio claims, is all down to a culture of
radical transparency and a commitment to truth above
all else. His treatise contains 210 lessons that elaborate on
these points in tedious detail.
Arguments must always be flushed out into the open,
grievances aired and disputes resolved, Dalio tells his troops.
Mistakes are to be celebrated for the lessons they provide.
Every meeting is recorded so there is no doubt about who
said what to whom, and no reinventing of history.
When there is a clear split in opinion, things get put to the
vote. In fact, Dalio expects there to be at least one vote at
every meeting with three or more people present, according
to insiders.
Yet Bridgewater is not run as a democracy, where every vote
is equal. Instead, it is what Dalio calls an evidence-based
meritocracy.
The votes in every staff opinion poll and ballot are weighted
according to a believability index. A person becomes more
believable partly through constant feedback from peers
through another iPad app. Dalio seems to be the most
believable of all.
Dont treat all opinions as equally valuable, he writes in
principle No 30. A hierarchy of merit is not only consistent
with a meritocracy of ideas but essential for it.
Dalio grew up in the New York suburb of Long Island, the
only son of a jazz musician and a housewife. He never cared
much for school and filled his time with part-time jobs as a
paperboy, a dishwasher at a restaurant, shovelling snow from
neighbours driveways and caddying at local golf clubs. By
the time he was 12, everyone he caddied for was talking
about the booming stock market.
He bought some shares in Northeast Airlines they cost less
than $5 apiece, so the youngster could afford more of them.
Dalio was unaware the company was headed for bankruptcy,
but an unexpected takeover saw him triple his money. His
next few efforts were nowhere near as lucky, but the
teenager was hooked.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

He scraped his way into the local community college, where


he started to pay more attention to his studies, and moved
on to Harvard Business School. After graduating, he knocked
around Wall Street for two years. After being fired by his
second employer for insubordination, Dalio set up
Bridgewater Associates from his two-bedroom apartment in
1975.
It started as an economic research firm. That changed in
1985 when the World Bank asked Dalio to manage a $5m
bond portfolio. The firm now manages $154bn from its airy,
purpose-built
campus
in
Westport,
Connecticut.
Bridgewaters main hedge fund, Pure Alpha, has generated
an average annual return of 13% after fees since its creation
in 1991.
Most of the firms trading is computerised it specialises in
designing clever algorithms to read stock-market volatility.
This approach helped Bridgewater to pre-empt and ride out
the financial crisis and it propelled Dalio into the big
league of investment.
He became a frequent guest on television news shows and
started to share his thoughts on the economy for the benefit
of the greater good, producing, for example, a slick 30minute YouTube presentation on how the credit bubble blew
up the American economy.
He also started to compile his book of principles mostly
soundbites that sometimes stray from the oxymoronic (Be
assertive and open-minded at the same time) to the plain
daft (1+1 = 3).
The computerised processes that helped Dalio to read
markets have increasingly been used to read people too.
Experts have been hired from the National Security Agency
and the Central Intelligence Agency to help gather employee
data. The firm also hired a scientist from IBM who had
helped to build its Watson artificial intelligence software.
This system means employees are constantly generating a
vast trove of data about their peers. Its dot collector app
gathers together data on how staff view one another based
on more than 60 attributes, each of which reflects the odd
management jargon of Dalios book.
Staff are ranked according to their willingness to touch the
nerve and conceptual thinking, for instance. Each of
them receives more than 2,000 of these dots a year. This
builds up into a baseball card showing scores that indicate
how seriously the individuals opinions will be ranked in
future surveys.
When staff were asked to settle the dispute between Dalio
and Jensen, it was not a question of opinion. They went to
the firms transparency library a databank of all the
recorded meetings in the office to see what had been said
at various points in the past.
While the open culture at the company means that the two
men have often had public rows, sources have claimed that
there has never been a spat on this scale before.
One of Dalios golden rules is that nobody should say
anything behind someones back that they would not say to
their face. While it is intended to encourage transparency,
one can easily see that it could discourage dissent; another
of Dalios principles is that firing people is not a big deal.
In 2011, around the time that Dalio disseminated his 210
principles to the public, he also revealed plans to gradually
transfer his power and some of his shareholding in the
company over the following 10 years. Jensen was accused of
grumbling in private about Dalio straying from the pact.
This story is getting blown out of proportion, Dalio said
last week. As part of my transition process we are
constantly trying to determine the proper mix of
responsibilities among our executive team.

Jensen, who joined the firm straight from Dartmouth


College, described the spat as nothing more than a healthy
disagreement. I cant imagine working in any other place,
he said.
Perhaps, therefore, Dalios unconventional methods have
worked. Pain + Reflection = Progress, as he writes in
Principles.
(Full article click - Times)
---

Irwin Stelzer
American Account: Fear of negative interest
rates sets off bout of panic
Taken from the Sunday Times 14 February 2016

WHOD a thunk it? Thats what a famous ventriloquists


dumbest dummy was made to say on a long-gone radio show
whenever he confronted anything new and, to him,
inexplicable, although obvious to everyone else. It came to
mind when the central bankers of Sweden decided to take
its interest rates further into negative territory. As Americas
stock markets dived, as the chairwoman of our central bank
refused to rule out the possibility of it adopting NIRP
negative interest rate policy, a term that will live in infamy
alongside QE in the halls of hard-money traditionalists
while being grilled by two congressional committees, and as
fears for the safety of the international financial structure
mounted, one can imagine the Swedes asking, Whod a
thunk it? though in a slightly more elevated way.
Here in America, two factors are intersecting to cause the
fear factor to mount and traders to dash for the exits.
Proving that my profession is aptly known as Political
Economy, the first is political. Investors, businessmen sitting
on cash piles, and Joe Sixpack (our equivalent of your man
on the Clapham omnibus) have watched as the avowed
socialist Bernie Sanders drags Hillary Clinton to the left in
their fight for the Democratic presidential nomination.
Sanders, who spent his honeymoon in Moscow, lays the
problems of America, which in his view are numerous, at the
feet of millionaires and billionaires who control the
political process, and bankers whose incontinence and
excessive risk-taking in pursuit of obscene profits caused the
recent Great Recession. All this would be corrected by taxing
financial transactions and the wealth of said millionaires and
billionaires, and requiring bankers who benefited from a
taxpayer bailout to seek still other bail to get out of the
jails to which they will be consigned when Sanders takes
over the White House. Unsettling talk, but not very. At least
at first.
Then Bernie, as he is known to supporters and adversaries,
moved from being a fringe candidate to a serious contender
for the Democratic nomination by securing a virtual draw
with Clinton in Iowa and thumping her by 20 points in New
Hampshire. His proposals can no longer be regarded as
merely the rantings of a marginal candidate.
Worse still, Clinton, who never needed a long spoon to sup
with Goldman Sachs and others on Wall Street, and who
along with her husband has accepted millions in campaign
contributions from the financial sector over her long political
career, suddenly joined the Sanders chorus. No bank is too
big to fail and no individual too big to jail is her new
anthem.
Never mind that it is a criticism of the Obama
administrations willingness to settle for fines, or that
turning on your big benefactors is not usual behaviour
outside of the world of politics. The point is that the
business and financial communities bulwark against the
anti-business faction of the Democratic party has lost its
most prominent advocate.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

Panicked businessmen are imagining the sounds of tumbrils


rolling over the Washington Mall, the modern version being
confiscatory taxes, stifling regulations and a loss of access to
the political process. This is made all the more likely by
opposition Republicans apparent insistence on destroying
one another in debates and primary battles, leaving the road
to 1600 Pennsylvania Avenue to the now anti-business Hillary
Clinton and possible control of the Senate to Democrats
eager to ally with the Massachusetts senator Elizabeth
Warren, who is ready with a gaggle of new regulations for
the financial sector.
To that frightening political prospect we can add what is
widely seen as a threat to the stability of the financial
sector, involuntarily imported from unhealthy European
banks. When Swedens Riksbank dropped its rate from -0.35%
to -0.5%, markets became even more convinced that the
profitability of the banks in NIRP countries, which are home
to large and medium-sized companies that account for 30%
of the value of all shares traded, is under threat.
The reasoning is simple. Negative rates impose a cost on
banks, which they can escape only by deploying their capital
in riskier loans and other assets. That drives up the value of
the assets they purchase, mostly bonds, lowering the
interest rate they earn on those assets. Result: a classic
margin and profit squeeze between rising costs and falling
charges for services, which threatens their stability.
As if that were not bad enough, banks are under pressure
from low oil prices, which have taken petrol in America
down to an average of less than $1.75 per gallon (32p a
litre). Cut-price oil was meant to enrich consumers, who
would then spend the spare cash, adding to the growth rate
of our recovering economy. It is not yet certain just what
consumers will do with their gains in the long run. What is
certain is that, here and now, the creditworthiness of
smaller oil companies has dimmed and banks are ruing the
day they lent money to frackers and oilfield supply
companies. In Houston, which is particularly sensitive to the
price of oil, one posh restaurant now sets the price of its
three-course dinner on Wednesdays at the lowest going rate
of crude, lately less than $30. Rumour has it that the Federal
Reserve Bank of Dallas has told banks to work with these
borrowers to avoid the need to write off their IOUs as bad
debts.
So you have a political climate that is frightening, to say the
least; negative interest rate policies that are squeezing the
profits of European banks, driving down their shares by
about 20% this year, twice as much as the all-share average;
energy loans that dont seem as safe with oil at about $30 a
barrel as they did when the price was more than $140 in
2008; and the worlds most important central bankers, our
Federal Reserve Board, admitting that further rate rises are
unlikely only two months after announcing that rates were
on the way up.
Worst of all, David Smith has been proved right. Last week
this papers economics editor wrote that negative interest
rates are a good way of persuading people and businesses
that something must be badly wrong. Janet Yellen, please
note.
(Full article click - Times)
---

Hedge fund giant Citadel takes out bet against


Schroders
Taken from the Sunday Telegraph 14 February 2016

Blue-blooded asset manager has fared better than some of


its rivals in volatile markets
In this years exodus from stocks and shares, it appears that
no one is safe. Schroders, one of the Citys oldest and
biggest asset managers, has become the target of a multimillion pound short-selling trade from the American hedge
fund Citadel.
Several London-listed fund managers have posted
disappointing results in recent weeks as the sharp stock
market decline discourages clients from investing their cash.
Shares in Schroders, which is due to publish its full-year
results next month, have lost about a fifth of their value in
the past year but has fared better than some of its peers
that focus more heavily on volatile emerging markets.
Citadel has recently declared a short position in Schroders
worth 0.5pc of its entire market value, or about 26m at
current prices. To short the stock, Citadel has paid to borrow
shares from a large investor before selling them to a third
party. If the price falls, it can buy more stock to repay the
original lender and pocket the difference in price.
Any short-seller borrowing more than 0.5pc of a companys
entire share base is required to declare the trade publicly
under Financial Conduct Authority rules. No fund has
previously set up a short of this magnitude against Schroders
since the rules were introduced in 2012.
Citadel has a number of other large short positions in the
London markets, including bets against EasyJet, Sainsburys,
Petrofac and the B&Q owner Kingfisher.
The fund launched by Ken Griffin in his Harvard dorm room
in 1990 now manages about $25bn. Citadel is one of the
worlds biggest hedge funds and has become known for its
high-frequency trading arm, which chases profits on
positions lasting fractions of a second.
Ben Bernanke, the former chairman of the US Federal
Reserve, joined Citadel as a senior adviser last year.
Schroders declined to comment while Citadel was
unavailable for comment.
Rival asset managers such as Aberdeen and Ashmore have
been popular targets for short-sellers in recent months,
although with the shares down 52pc and 32pc respectively in
the past year, some funds have already closed out their
shorts.
(Full article click - Telegraph)

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

News Asia
Pentagon Says North Korea Bent on Developing
Missile That Can Reach U.S.
Taken from the WSJ Saturday, 13 February 2016

Report comes after recent rocket launch and as America and


its regional allies consider ways to confront a moremenacing Pyongyang
North Korea remains committed to developing a long-range,
nuclear-armed missile that could pose a threat to the U.S., a
Pentagon report released on Friday said.
That conclusion, in a report required by Congress every
other year, underscores the security concern posed by the
country less than a week after its leader Kim Jong Un testfired a Taopodong-2 long-range rocket.
But it is North Koreas KN08 intercontinental ballistic missile,
known as the Hwasong-13 that could have the capability to
pose a threat to the U.S., according to the assessment.
If successfully designed and developed, the KN08 likely
would be capable of reaching much of the continental
United States, assuming the missiles displayed are generally
representative of missiles that will be fielded, the report
said. It noted the complexity of the system and said it would
require multiple flight tests for the missile to be effective.
North Korea also continues to develop another weapon, the
TD-2, which also could reach the continental U.S. if it were
configured as an intercontinental ballistic missile, the report
said.
Pyongyang has several hundred short- and medium-range
ballistic missiles that threaten South Korea and Japan, the
report said. At the same time, it is pursuing its nuclear
weapons program, having run tests in 2006, 2009 and 2013,
the report said.
Mr. Kim also is pursuing a submarine-launched ballistic
missile capability that highlights the regimes commitment
to diversifying its missile force, strengthening the missile
forces survivability and finding new ways to coerce its
neighbors, the 23-page report said.
Titled Military and Security Developments Involving the
Democratic Peoples Republic of Korea, the report repeats
many of the same assessments made in the previous review
issued in 2013. But it comes as U.S. and regional allies
consider ways to confront North Korea as it becomes more
menacing on the world stage.
The U.S. temporarily deployed an additional Patriot missile
battery in South Korea in response to Pyongyangs nuclear
test and Taopodong-2 launch. The U.S. military command in
South Korea said an air defense battery unit from Fort Bliss,
Texas, has been conducting ballistic missile training using
the Patriot system with other American forces at Osan Air
Base near Seoul.
For the U.S., North Korea is rapidly becoming a clear and
present danger, said John Park, an expert on northeast Asia
at Harvard Universitys Kennedy School. But for allies in the
region, it already is a clear and present danger.
Mr. Park said North Koreas missile program still has many
technical hurdles to surmount, but the steady, incremental
steps it is taking is fast making the threats it poses very real.
Last weeks rocket launch reinforced security jitters in South
Korea that have led Seoul to rethink its ambivalence toward
a U.S. missile defense system known as the Terminal High
Altitude Defense System, or THAAD. Formal talks on its
possible deployment are expected to begin soon, defense
officials said.
Beijing has long opposed deployment of THAAD on the
Korean Peninsula for fear its range could extend into China.

North Korea is also strengthening its conventional military


force, the report said. Its military has about one million
personnel, making it the fourth largest military in the world.
As much as 5% of North Koreas 24 million people serve on
active duty and another 25% to 30% are assigned to a reserve
or paramilitary unit, according to the report.
The U.S. has about 28,000 military personnel based in South
Korea.
The Pentagon report said few of North Koreas weapons
systems are based on modern technology and that the
country hasnt kept pace with regional military capability
requirements, meaning it hasnt acquired new jet fighters,
relies on older air defense systems and has rocket launchers
still towed by tractors.
The review makes observations about the perceptions of
security inside North Korea, painting Mr. Kim as a leader who
doesnt trust his closest ally, China. It says Mr. Kims power
over the North Korean population remains perhaps his most
powerful weapon.
Internally, the report said, the Kim regime seeks to
maintain ideological control over a citizenry that is growing
less reliant on the state because it is no longer the primary
source of basic goods and services.
(Full article click - WSJ)
---

China central bank: speculators should not


dominate sentiment
Taken from the Reuters News Saturday, 13 February 2016

Speculators should not be allowed to dominate market


sentiment regarding China's foreign exchange reserves and it
was quite normal for reserves to fall as well as rise, central
bank governor Zhou Xiaochuan was quoted as saying on
Saturday.
China's foreign reserves fell for a third straight month in
January, as the central bank dumped dollars to defend the
yuan and prevent an increase in capital outflows.
In an interview carried in the Chinese financial magazine
Caixin, Zhou said yuan exchange reform would help the
market be more flexible in dealing with speculative forces.
There was a need to distinguish capital outflows from capital
flight, and tight capital controls would not be effective for
China, he said. China has not fully liberalized its capital
account.
Zhou added that there was no basis for the yuan to keep
depreciating, and China would keep the yuan basically stable
versus a basket of currencies while allowing greater
volatility against the U.S. dollar.
The government also needed to prevent systemic risks in the
economy, and prevent "cross infection" between the stock,
debt and currency markets, he said.
The comments come after China reported economic growth
of 6.9 percent for 2015, its weakest in 25 years, while
depreciation pressure on the yuan adds to the case for the
central bank to take more economic stimulus measures over
the near-term.
A slew of economic indicators has sent mixed signals to
markets at the start of 2016 over the health of China's
economy.
Activity in the services sector expanded at its fastest pace in
six months in January, a private survey showed on Feb. 3,
while manufacturing activity fell to the lowest since August
2012.
(Full article click - Reuters)
---

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

BoJ deputy says Japan needs bolder measures


to unlock growth
Taken from the FT Sunday, 14 February 2016

The deputy governor of the Bank of Japan has called on the


country's government to pull its weight, as the central bank
strains to haul the worlds third-largest economy decisively
out of deflation.
Last month the BoJ embarked on its latest round of easing,
saying it would start charging for excess reserves deposited
at the central bank. At the time, it said it wanted to provide
a shot of stimulus at a critical moment, just ahead of the
annual Spring round of wage negotiations between
companies and workers' groups.
In a speech in New York on Friday, deputy governor Hiroshi
Nakaso said that the government now needed to do more to
boost Japans growth potential.
He referred to a joint statement on overcoming deflation,
signed by the BoJ and the government in January 2013, a
few months before the bank embarked on its first round of
easing under the current governor, Haruhiko Kuroda. In it,
the central bank pledged to stimulate demand through ultraaggressive monetary policy while the government promised
to pursue all possible supply-side reforms.
Now that the Bank of Japan has taken monetary easing one
step further...I think that the original third arrow of
Abenomics, the growth strategy, must also fly faster, he
said.
The unusually candid speech comes as the success of the mix
of the policies pursued by prime minister, Shinzo Abe,
remains in the balance. After three separate bursts of
monetary stimulus from the BoJ, inflation has gained some
momentum while corporate profits have been boosted by a
sharp drop in the value of the yen.
However, Japans potential growth rate remains so low
around or slightly below 0.5 per cent, according to the BoJs
estimate that any setback has the potential to tip the
country into recession.
Economists at Goldman Sachs expect that the first reading of
gross domestic product figures for the fourth quarter, due on
Monday, will show an annualised contraction of 1.2 per cent
from the third quarter, hit by a slump in consumer spending
due to a mild weather and smaller winter bonuses.
The BoJ now fears that many cash-hoarding companies are
set to resist calls for higher wages, as they assume that
inflation will be kept in check by a combination of weak
demand, a lower oil price and a stronger currency. The
national trades union group, Rengo, has already signalled a
less aggressive stance in this years negotiations, saying it is
aiming at an across-the-board increase of around 2 per
cent less than the 2015 demand for at least 2 per cent.
That could threaten progress toward the BoJs sole policy
target: an inflation rate of 2 per cent. In December Japan's
consumer price index stood at 0.1 per cent, excluding fresh
food, and 0.8 per cent excluding energy.
The sluggish increase in nominal wages is thought to reflect
low productivity growth and the strong deflationary
mindset, said Mr Nakaso. My answer to what kind of
policies are needed, is that both monetary and fiscal policies
and structural reforms are indispensable.
Mr Nakaso is likely to make similar remarks during a speech
to business leaders next month in Okinawa, according to
people familiar with his thinking, imploring the government
to take bolder measures to unlock growth.
Takuji Okubo, managing director at Japan Macro Advisors, a
research boutique, said that the governments third arrow
record has been poor, citing a lack of true reform of the
labour market, the service sector or the public pension
system.

He added that the sharp sell-off in the Japanese stock


market since the beginning of the year, coupled with a
renewed appreciation of the yen, seems strong enough to
put an end to the Abenomics boom.
The expiry date has now come to pass, he said.
(Full article click - FT)
---

N. Korea launches new ICBM unit

Taken from the Yonhap News Sunday, 14 February 2016

North Korea has formed a new military unit to deploy a roadmobile intercontinental ballistic missile (ICBM), multiple
South Korean government sources said Sunday.
They said the KN-08 Brigade, designated after the ICBM of
the same name, is a subordinate unit of the Strategic Forces,
which oversees all missile units in the North. Sources said it
indicates North Korea has inched closer to fielding the roadmobile ICBM.
Last week, U.S. Director of National Intelligence James
Clapper said North Korea "has already taken initial steps
toward fielding this (KN-08) system, although the system has
not been flight-tested." Clapper also said Pyongyang was
committed to developing "a long-range, nuclear-armed
missile that is capable of posing a direct threat" to the
United States.
The KN-08 was first unveiled in a military parade in April
2012 celebrating the 100th birthday of Kim Il-sung, the
North's founder.
Strategic Forces now commands four strategic and tactical
missile units. With North Korea apparently bolstering its
missile programs, the commander of the Strategic Forces,
Kim Rak-kyom, was promoted to the rank of four-star
general late last year.
The KN-08 is believed to have a range of at least 10,000
kilometers. In its annual report to Congress, the Pentagon
said Friday if the KN-08 is properly designed and developed,
it could be difficult to track because of its mobility.
Elsewhere in its arsenal, North Korea is said to have
produced more than 300 Nodong Missiles with a range of
1,200 kilometers, and about 30 Musudan missiles that can
travel some 3,000 km. They are said to be capable of
reaching the U.S. military bases in Japan and in the Pacific
island of Guam, a U.S. territory.
(Full article click - Yonhap)
---

The central bank is neither god nor a


magician ... Chinas central bank chief Zhou
Xiaochuan breaks silence over the yuan
Taken from the SCMP Sunday, 14 February 2016

Theres no basis for continued depreciation of the currency,


says the governor of the Peoples Bank of China
After months of silence, Chinas central bank chief, has
finally broken his silence over Beijings currency policy and
assured the public there is no basis for the yuans continued
depreciation.
Zhou Xiaochuan, governor of the Peoples Bank of China
(PBOC), also rejected rumours it would tighten capital
controls.
In an interview published by mainland financial magazine,
Caixin, two days before the mainlands financial markets
reopen on Monday, Zhou addressed concerns over Chinas
dwindling foreign reserves, which last month fell to the
lowest levels since 2012.
It is normal for foreign reserves to rise and fall as long as
the fundamentals face no problems, Zhou said in his first
public comments on the banks rationale and strategies, in
the face of multiple challenges since it devalued the
renminbi by 2 per cent in August.

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.

The PBOC has pumped in money to stabilise the yuan


because of pressure following the economic slowdown and
continued capital outflow, which has depleted Chinas
foreign reserves. Holdings fell by US$99.5 billion in January
to US$3.23 trillion.
The central bank is neither god nor a magician who can
turn uncertainties to certainties ... sometimes, the central
bank has to say, Sorry, we have to wait for new data.
Zhou said China had no intention of tightening capital
controls as it would be hard to implement, given the size of
Chinas international trade and businesses abroad. The level
of capital outflow in recent months was normal.
Capital outflow and capital flight are two different
concepts.
He said speculators were targeting China and that China
would not let the market sentiment be dominated by these
speculative forces.
He also made no mention of billionaire investor George
Soros, who has been in a war of words with Chinese state
media for weeks after suggesting the mainlands economy
was heading for a hard landing.
The PBOC would be cautious when using resources to fight
international speculators, Zhou said. It does not mean we
must take direct action whenever they come, he said,
adding that a more flexible yuan would help China face
speculators pressure by effectively using our ammunition
while minimising costs.
His remarks could help to stabilise the market and provide
global investors with a clearer idea of the central banks
stance towards the yuan exchange rate, said ANZ Banking
senior economist Raymond Yeung Yue-ting.
Zhou also responded to criticism of the PBOCs lack of
transparency and poor communication. The central bank is
neither god nor a magician who can turn uncertainties to
certainties, Zhou said. Sometimes, the central bank has to
say, Sorry, we have to wait for new data.
The bank would use a basket of currencies as reference and
carefully manage any daily volatility in the yuan against the
dollar, as well as using a wider range of macro-economic
data, he said. The yuan is basically stable against a basket
of currencies... there is no basis for devaluation.
(Full article click - SCMP)
---

These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.