To: 2MAR$ who wrote (78910 ) 9/1/2011 8:56:19 PM From: TobagoJack Read Replies (1) | Respond to just in in-tray, per greed n fear· Risk assets have enjoyed an only too natural bounce over the past week. GREED & fear · Ben Bernanke’s speech at Jackson Hole clearly laid the way for what GREED & fear GREED & fear · GREED & fear GREED & fear GREED & fear · GREED & fear · GREED & fear GREED & fear · The risk of a dollar rally against the euro in coming months is growing. This is because, sooner or later, the ECB will have to reverse its recent insane monetary tightening. The issue here is whether markets will allow Trichet to save face and not performs an abrupt U-turn before his scheduled departure from the scene on 31 October.· The fact that the end game has not yet been reached in Europe is clear from the conflicting noise that continues to come out of Euroland. The Euroland policy elite is not yet in a mood to focus on using the EFSF to recapitalise the banks, a topic that will inevitably involve increasing the capitalisation of EFSF. This means that renewed market stress will have to force them to focus on this. · Finland’s collateral deal with Greece was allowed because there is a robust political movement in that country attacking periphery bailouts in the shape of the True Finns party. The key point to watch out for in coming months is whether a similar political movement emerges in Germany.· GREED & fear GREED & fear · There is growing hope in Switzerland that the Swiss National Bank may have stopped a further dizzying ascent in the Swiss franc by pushing interest rates into negative territory at the short-dated end of the Swiss franc yield curve. There is also growing talk of banks imposing negative rates on foreign Swiss franc deposits. Such negative rates are needed if the Swiss want to avoid further Swiss franc appreciation.· The yen, which benefits from risk aversion, is vulnerable to further appreciation. It will be important to monitor any further efforts by the Bank of Japan to ease further. Long suffering investors in Japan have also had to contend · Another wave of global risk aversion would actually be quite positive for Indian equities. This is because it would be likely to deter the Reserve Bank of India from tightening further at its next policy meeting on 16 September since such increased risk aversion would likely lead to commodity price weakness.· Slow economic growth and slowing credit growth will certainly lead to a pick up in NPLs in India. The question is how large. What is now clear is that growth will decelerate further from the 7.7%YoY growth reported for 2Q11. GREED & fear · Asia saw a bizarre interest rate hike last week in Thailand in the midst of global risk aversion even though the Thai 10-year government bond yield had declined by 62bp to 3.4% in the three weeks prior to the rate hike. GREED & fear · The PBOC has decided to include margin deposits in the deposit base when calculating required reserves. But this seems to have been triggered primarily by regulatory concerns regarding the banking sector rather than macro inflation consideration. The Chinese authorities are still seeking to assert greater control over credit growth beyond bank lending. clsa.com or sent to you upon request.
