Good Article On Why Our Exchange Rate Is Getting Worse

[billten]

http://in.reuters.com/article/2012/07/14/southeastasia-funds-idINDEE86D01920120714

Excerpt:

Improved economic management is also attracting investor interest. Countries like Indonesia and the Philippines are reaping the benefits from paring down debt and keeping their budget deficits in check in recent years. Indonesia received investment grade status last year and many are tipping the Philippines to be next as Aquino makes progress in battling corruption and tax evasion.

Low interest rates are enabling governments to raise spending on infrastructure - one of the region's big weak spots. That promises major spin-off benefits for companies as governments move to liberalise their economies, turning state-run companies into private enterprises.

Malaysia's $444 billion Economic Transformation Program aims to attract 92 percent of its targeted investment from the private sector. The country is poised to topple Hong Kong as Asia's top IPO destination for 2012, partly due to the state's divestment of its stake in palm oil giant Felda.

"That (liberalisation) dynamic is not something that's repeated elsewhere in the world," said Edward Teather, regional economist at UBS. "If anything, things are going the other way."

VALUATIONS STRETCHED

Some economists see the upswing as a temporary wave of exuberance that risks losing momentum without deeper reforms.

The rise in consumer spending has been partly fuelled by easy personal credit in countries such as Indonesia and the Philippines and by strong fiscal spending in others, such as Malaysia and Thailand, said HSBC's Neumann.

"Increasingly we have to ask ourselves really hard questions as to how sustainable is this process and how we can put growth in ASEAN on a much more sustainable trajectory," he said.

One problem facing investors is that markets in Southeast Asia already seem to have priced in much of the good news, and the region is vulnerable to short-term wobbles.

A recent drop in the Malaysian ringgit was a flashing red light for foreign investors who own nearly 40 percent of the local bond market, and the Philippine central bank last week tightened rules on its short-term special deposit instrument, which has attracted $40 billion of funds, to tackle speculative, or hot money.

I agree about how overvalued the markets are here and can only see a bubble bursting as most of the numbers i read are inflated and / or simply unreal.

[nor cal mike]

http://in.reuters.co...E86D01920120714

Excerpt:

Improved economic management is also attracting investor interest. Countries like Indonesia and the Philippines are reaping the benefits from paring down debt and keeping their budget deficits in check in recent years. Indonesia received investment grade status last year and many are tipping the Philippines to be next as Aquino makes progress in battling corruption and tax evasion.

Low interest rates are enabling governments to raise spending on infrastructure - one of the region's big weak spots. That promises major spin-off benefits for companies as governments move to liberalise their economies, turning state-run companies into private enterprises.

Malaysia's $444 billion Economic Transformation Program aims to attract 92 percent of its targeted investment from the private sector. The country is poised to topple Hong Kong as Asia's top IPO destination for 2012, partly due to the state's divestment of its stake in palm oil giant Felda.

"That (liberalisation) dynamic is not something that's repeated elsewhere in the world," said Edward Teather, regional economist at UBS. "If anything, things are going the other way."

VALUATIONS STRETCHED

Some economists see the upswing as a temporary wave of exuberance that risks losing momentum without deeper reforms.

The rise in consumer spending has been partly fuelled by easy personal credit in countries such as Indonesia and the Philippines and by strong fiscal spending in others, such as Malaysia and Thailand, said HSBC's Neumann.

"Increasingly we have to ask ourselves really hard questions as to how sustainable is this process and how we can put growth in ASEAN on a much more sustainable trajectory," he said.

One problem facing investors is that markets in Southeast Asia already seem to have priced in much of the good news, and the region is vulnerable to short-term wobbles.

A recent drop in the Malaysian ringgit was a flashing red light for foreign investors who own nearly 40 percent of the local bond market, and the Philippine central bank last week tightened rules on its short-term special deposit instrument, which has attracted $40 billion of funds, to tackle speculative, or hot money.

I agree about how overvalued the markets are here and can only see a bubble bursting as most of the numbers i read are inflated and / or simply unreal.

I would agree that the markets are overvalued. I am always amazed at the governments ability to substitute optimism for reality.

[FlyAway]

The big question is when the balloon will pop?

A friend of mine was in Manila a few weeks ago and decided to buy a condo. 9 Million Peso's for a 88sqm unit being built by Mega World in Fort Bonifacio. Expected date of completion? 2016!!! To me I consider that to be one heck of a gamble.

Big money is flowing into the country. This is not fictional money on paper either.

[billten]

IMO when China really slows, the entire Asia bubble will slip horribly. All i can say is that i intend to play the markets for the next 6 - 9 months but towards the end of the first quarter next year i will be all in cash awaiting the normal big correction that you see after a US election. I honestly expect to see Asia beat to hell about that time too. Again, this is just my musings, not for anyone else's advice.

[Old55]

IMO when China really slows, the entire Asia bubble will slip horribly. All i can say is that i intend to play the markets for the next 6 - 9 months but towards the end of the first quarter next year i will be all in cash awaiting the normal big correction that you see after a US election. I honestly expect to see Asia beat to hell about that time too. Again, this is just my musings, not for anyone else's advice.

From what I have read you are spot on to do with China. If in fact the Chinese economy were to take a huge crash there is a real chance of an uprising and regime change. The ramifications would affect Philippines and the whole world.

[FlyAway]

From what I have read you are spot on to do with China. If in fact the Chinese economy were to take a huge crash there is a real chance of an uprising and regime change. The ramifications would affect Philippines and the whole world.

In China, workers live at the factories in dormitories. If there were mass lay offs then there would be a large amount of people heading back to mom and dad or some other relative.

The effects of an economic crash in China would most likely be something on a scale unprecedented in modern times.

[billten]

effects of an economic crash in China

China is an incredibly conservative economy and with all the controls that they have in place it is very unlikely that the economy will crash per se. It is more likely that the 'slow down' in China will deepen and regardless of the huge govt stimulus the economy will miss growth targets and then the Western economies will react very badly. The Western markets are free and are much more vulnerable than the ones in China. Thing is that once China starts slowing, the 'Asia as the flavor of the month' will likely fall away. At that point money will flow out of the Phillipines far more rapidly than it arrived, viola... crash.

[i am bob]

The fun part about China and their slowing economy is that all the experts disagree by 180 degrees on what will happen. I agree that the government will just keep throwing money out to make it look like they are still ok but everybody will know they are falling apart.

I don't think the Philippine economy will crash with the Chinese economy. They are too independent and separate on the World market. They will see a dip and the peso will drop but not drastically. Of course I could be wrong...

Anybody else notice that around the time that China's economy first started slipping was when they also started bullying over the Scarborough Shoals and the rest of the disputed waters that China is claiming?

[JJReyes]

China's economy is tied to the United States. While we owe them $1.3 trillion in US Treasury borrowings, 55% of their exports are sent to the USA. One is dependent on the other.

Philippines' economy is based on the labor force. The domestic force manufactures parts like electronic components and international as in Overseas Filipino Workers (OFWs). Both Hong Kong and Macau have large numbers of OFWs, but these are Special Autonomous Regions. Even their currencies are separate from Mainland China.

I don't think the Philippines is dependent on what happens in China.

[billten]

I don't think the Philippines is dependent on what happens in China.

That is true, however, the perseption that SE Asia is 'doing well' and therefore a place to pour money into will likely vanish if the major ecomony in Asia starts to dip.