Korea’s Geopolitical Jitter Jibes
South Korean shares shook off another reported missile test in the North and Russia-Ukraine fallout as it hosts the next winter Olympics as currency and historic clashes concentrated on Japan and China with trade and sea lanes at issue. The President rolled out her Economic Innovation Program from the campaign aiming to sharpen competiveness and slash bureaucracy as reform of the century-old housing rental system is also debated with the central bank warning of leverage buildup among both landlords and tenants. Consumer debt is a lingering burden from a pre-crisis credit card binge, as investors were reminded of the danger following a massive breach of customer data that forced bank executive apologies and resignations. The central bank stayed on hold while continuing to threaten won intervention to counter it double-digit rise against the yen which has eaten away at electronics and Asian export shares. It proclaimed that Federal Reserve tapering was unlikely to affect immediate decisions as the capital account showed a $60 billion deficit in 2013 mainly due to local banks’ external activities. Producer prices are falling and unemployment has been steady at 3 percent, as fallback domestic demand supports 4 percent GDP growth despite construction and shipping setbacks that saddled the state development lender with a $1 billion loss. Japan’s last quarter output rise was only 1 percent in turn as the trade gap hit a record with manufacturing relocation offshore and consumer braced for a tax increase to reconcile the fiscal trajectory with breakneck monetary expansion. In its latest iteration central bank on-lending facilities were raised despite the lack of corporate borrowing appetite. Tokyo and Washington also failed to reignite Trans-Pacific Partnership momentum as the Abe government wants to exempt one-tenth of tariffs while insisting the US further slash vehicle import barriers. It also provoked diplomatic outcry from honoring World War II generals at a memorial shrine as the islands dispute with Beijing festers and Korea criticizes the glossing over of military atrocities and occupation. On the aid front the development cooperation agency has tried to boost partnership with former enemies through large-scale financial and technical lines to Burma and Mongolia for example.
Sovereign bond guarantees are a key element and reached Latin America and the Middle East, despite continued retail fund outflows contributing to global decline. However emerging market-currency denominated domestic Uridashi issuance is off to a decent start at a $15 billion annual tempo, with the Mexican peso and Brazilian real each with 30 percent shares. The Turkish lira, South African rand and Russia ruble portions have plummeted with their troubles and new entrants like the Indian rupee are vying for attention. Developed economy stalwarts Australia and New Zealand have lost favor as they cope with softer Asian commodities desire and tourism inflows. The Aussie dollar is also flagging from mining and housing boom hangovers which may imperil banks despite their lofty standing in recent ratings agency global comparison estimates.
