30 Jan 2014
Flash: EM as a percentage of total growth is stabilizing if not shrinking - Societe Generale
FXstreet.com (Guatemala) - Kit Juckes, Global Head of Currency Strategy at Societe Generale notes that risks are for those economies left with very expensive currencies.
Key quotes:
"The trend is that for both commodity and EM economies, some of the gains of the past decades have left them with very expensive currencies. These gains were sustainable propelled by the credit bubble."
"With China the last one to slow down and reduce the tap of overly easy moneys, portfolio outflows and a necessity to reprice EM/USD are steadily kicking in. EM as a percentage of total growth is stabilizing if not shrinking."
"The Bretton Wood II system that was supposed to be perpetually sustainable pre 2008 is having its last legs cut off, again. Not enough potential growth relative to debt and ageing population, as too many economies approached the slower speed of advanced economies. In the words of an Asian client, may we live in interesting times. They are removing the good stuff from the system, rehab is going to take a while."
Key quotes:
"The trend is that for both commodity and EM economies, some of the gains of the past decades have left them with very expensive currencies. These gains were sustainable propelled by the credit bubble."
"With China the last one to slow down and reduce the tap of overly easy moneys, portfolio outflows and a necessity to reprice EM/USD are steadily kicking in. EM as a percentage of total growth is stabilizing if not shrinking."
"The Bretton Wood II system that was supposed to be perpetually sustainable pre 2008 is having its last legs cut off, again. Not enough potential growth relative to debt and ageing population, as too many economies approached the slower speed of advanced economies. In the words of an Asian client, may we live in interesting times. They are removing the good stuff from the system, rehab is going to take a while."