Thoughts on Europe

Having been in Europe for the past week or so, or specifically in Belgium I haven’t noticed a huge impact on consumer behaviour versus the last year or any other period that I have come here annually. Instead the majority of issues that I hear stem from the likelihood of increased taxes from the government (mind you people here already pay just over 50% income tax), stricter rules and regulations regarding businesses, and what is scary is that 56% of GNP here (according to De Staandard) comes from the public sector! People still of course want to keep the Euro, western Europe seem fed up that Southern Europe needs to be bailed out constantly and that they have to pay for that cost, major manufacturing companies are shifting away slowly and parents are worried about their children’s future as they worry about job potentials. So all in all its not as gloomy as SE Asia was in 1997-1998 but things are far from rosy.

Don’t fight with central banks

The first rule of fight club investing is don’t fight with the central banks.

Globally central bank policies have certainly transformed markets and placed a floor under all pull backs over the past few years. First the ECB pledge’s to buy up 3 year bonds (unlimited purchasing) of countries that will obey the laws and conditions imposed by the EFSF/ESM, and then the Fed announces QE3 which in effect extends is policy until mid 2015 from 2014 and agrees to buy US$ 40 bn per month for an unlimited period of time until the US unemployment declines substantially. (Although 40 bn per month, means 480 bil a year, which is less than QE2 US$600 bn…but they did say it could “unlimited”). And then the Japanese central bank announces it will expand its asset purchase and loan program by 10 trillion yen (US$126 bn) to 80 trn yen. And now today the Chinese central bank announces injection of 365bn yuan into the Chinese banking system.

Four major centrals bank announcing massive measures in the month of September. What has the impact been of all this? It’s kept equity markets up, bond yields down, and surprised a lot of market participants (including us) that thought the month of September would be its usual awful self.

Never fight with central banks

Thai Stocks to Get Boost From Infrastructure Push

Saw this article over at CNBC and it does a nice summary of what we were all waiting for this government to finally confirm and announce. THB 2.2 trillion baht worth of projects and liquidity to flush the system here. While companies will benefit? Well in this order I think. Contractors – Cement co’s – Banks – and then hopefully the rest of the economy.

The Thai government is planning to spend more than 2.2 trillion baht ($71.1 billion) over the next seven years to build railways and roads and another 350 billion baht ($11.3 billion) on infrastructure to prevent a repeat of the devastating 2011 floods that dragged economic growth down to just 0.1 percent for the year. This spending, which will be partly financed by the private sector, will boost the Thai economy, analysts say.

Source: CNBC

Thai Exports were rubbish in August

Thailand’s Export numbers for August were rubbish, according to the the Ministry of Commerce reported that exports dropped -6.9% YoY  to US$ 19.6 bn from -4.4% YoY in July (although they were still up +1.1% MoM)

Still something we’ve been writing all year is that because of the austerity measures in Europe coupled (and partly leading to) the slowdown in China will and have hit businesses everywhere. Funnily enough printing tonnes of $$ in the US is what may have led to the US economy continuing to grow.

See below for a breakdown of the numbers

Products

  • Industrial product exports, a major category (75.7% of total exports), recovered 1.8% MoM from -3.4% MoM in July, led by a 69.3% MoM increase in jewellery and decorative products vs. -24.7% MoM last month and with a rise in electronic parts exports of +0.4% MoM vs. – 17.6% MoM last month. However, auto exports contracted -11.7% MoM from +7.5% MoM in July and a drop in electronic appliances of -18.1% MoM vs. +2.7% MoM last month.
  • Agricultural product exports (9.9%) declined by -8.5% MoM from +23.8% MoM in July. The main agricultural product export was rubber, dropping 11.6% vs. +7.9% MoM in July and rice declined -10.3% MoM vs. +31.6% MoM in July.

Export Markets

    • Exports within Asia (63%) continued to shrink by -2.2% MoM vs. -1.5% MoM in July as exports in Asia and to Japan fell 4.8% MoM and 3.9% MoM, respectively. However, exports to China, Hong Kong and Taiwan recovered slightly by +4.0% MoM, +7.5% MoM and +6.3% MoM, respectively.
    • European exports (14%) expanded once again by +18.9% MoM from -2.2% MoM in July,
    • US exports (10%) contracted at a lower pace of -1.5% MoM from -4.0% MoM in July