The Global Currency Investor A Quarterly Analysis of 50 World ...

More documents

Recommendations

Info

Jan 09Jul 09Jan 10Jul 10Jan 11Jul 11Jan 05Sep 05May 06Jan 07Sep 07May 08Jan 09Sep 09May 10Jan 11COUNTRY REPORT: ChileOutlook: PositiveS&P Moody's Rates Policy 3m 5y 10y[30-Sep-2011]Rating (LC) AA Stable Aa3 Stable5.25% 4.99% 4.87% 5.09%Economy and Market OutlookThe economy continues to grow strongly but the outlook is now clouded by the global turmoil giventhat Chile is a relatively open economy with significant exposure to global demand via its copperexports. Copper has fallen sharply but to a historically very high level, if the global economy doesmove into recession then further sharp falls would be expected and this would dramatically changethe growth picture in Chile. Estimates are that a 10% move in copper prices effects GDP byapproximately 0.4%. Historical data shows an economy that is moderating but to still robust levelsof growth with the economic activity index for July (a key indicator of growth) running at 4% y/y.Chile continues to have an enviable fiscal position and thus the government are in a strong positionto run a countercyclical fiscal policy on any downturn. The central bank have maintained interestrates at 5.25% at their recent meeting and are now likely to keep interest rates on hold for sometime with the direction of the next move depending entirely on how the global picture plays out. ThePeso continues to look very attractive given the expectation for a growing current account surplus incoming years but again this is reliant on global copper prices. The central bank has beenintervening in the currency quite aggressively when the peso was strengthening, however, so hassignificant firepower if it decides to support the currency on any downward move in EM FX globally.With very few investors in the market the Peso is a good defensive currency with reasonable levelof interest and we thus continue to keep a positive outlook.800750700650600550500450400350USD/CLPJPY/CLP8.07.57.06.56.05.55.04.54.05,0004,5004,0003,5003,0002,5002,0001,5001,0005000Copper exports USDm2010 2011 (f) 2012 (f)Real Growth (%) 5.2 6.5 4.7CPI (%)* 1.5 3.1 3.1Current account (% GDP) 1.9 0.1 -1.5Fiscal balance (% GDP) -0.3 1.4 1.6Government Debt (% GDP) -2.4 -2.7 -7.6Daily volumesSpot FXUSD1.5bnPoliticsPresident: Sebastian PineraNext election: 2014Inflation worries have eroded Pinera'spopularity ratings as well as controversyover his sales of various companies. Pollssuggest his popularity is at rock bottom withthe majority of the electorate now sayingthey 'believe little if anything' that he says.FX Reserves*End of Year36.37bnSource: IMF, S&P, Bloomberg50Confidential – not for redistribution. This material must be read in in conjunction with the “Important Information” statement provided on the last herein. page.
Jan 09Jul 09Jan 10Jul 10Jan 11Jul 11Jan 05Sep 05May 06Jan 07Sep 07May 08Jan 09Sep 09May 10Jan 11COUNTRY REPORT: ColombiaOutlook: NeutralS&P Moody's Rates Policy 3m 5y 10y[30-Sep-2011]Rating (LC) BBB+ Stable Baa3 Stable4.50% 4.68% 6.53% 7.53%Economy and Market OutlookThe economic outlook in Colombia continues to look bright although the country will not be immunein the event of further global turmoil. Q2 GDP data showed the economy growing by 5.2% year onyear and retail sales data for July showed an 11.8% year on year rate of growth. Without the globalworries the central bank would undoubtedly be continuing to increase interest rates up to 5% andpossibly higher but, given the global backdrop they have now paused at 4.50% and are likely tomaintain this stance until they have more clarity. If the world does experience another downturn thekey transmission mechanism into the Colombian economy would be via commodity prices. Fiscalreform carried out in 2010 should provide the government with substantial flexibility in this scenarioto provide a stimulative fiscal boost. Inflation has proved to be stubbornly sticky above 3% and therisk that the central bank will take by holding interest rates is that if global growth doesn't moderatethe economy will start to build inflationary pressures once again given that it is already now at fullcapacity. The Peso has fallen back but is close to the governments 'equilibrium rate' of 1,900 to theUS dollar and as one of the best performing currencies in the region over the last few years we takea neutral stance on the currency even though we are optimistic about the economic outlook. Wewould look to purchase the currency on any under performance.2,600.02,400.02,200.02,000.01,800.01,600.0USD/COPJPY/COP35333129272523211917159.08.07.06.05.04.03.02.01.00.0Headline Inflation y/y %2010 2011 (f) 2012 (f)Real Growth (%) 4.3 4.9 4.5CPI (%)* 3.2 3.1 3.1Current account (% GDP) -3.1 -2.6 -2.5Fiscal balance (% GDP) -3.1 -3.0 -1.5Government Debt (% GDP) 28.1 29.2 28.4Daily volumesSpot FXUSD1bnPoliticsPresident: Juan Manuel SantosNext Election: 2014There are no major policy changesexpected although potentially Colombia islooking at ways to follow the model of Chileand aggressively pay down governmentdebt in coming years. Corruption continuesto dog issues with Santos facing criticismover his shortlist choice for prosecutorgeneral.FX Reserves*End of Year29.75bnSource: IMF, S&P, Bloomberg51Confidential – not for redistribution. This material must be read in in conjunction with the “Important Information” statement provided on the last herein. page.
Page 1 and 2: The Global Currency InvestorA Quart
Page 6: Regional Summary: Asia & Emerging E
Page 10 and 11: Jan 09Jul 09Jan 10Jul 10Jan 11Jul 1
Page 14 and 15: Currency Reports: Asia14Confidentia
Page 28 and 29: Currency Reports: Europe28Confident
Page 34 and 35: Jan 09Jul 09Jan 10Jul 10Jan 11Jan 0
Page 46 and 47: Currency Reports: The Americas46Con
Page 54 and 55: Currency Reports:Africa and Middle
Page 62 and 63: Jan 09Jul 09Jan 10Jul 10Jan 09Apr 0
Page 64: Important InformationThis document

The Global Currency Investor A Quarterly Analysis of 50 World ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?