Good morning, how excited are you about today??? A lot happening! RBA hike day!!! Will the AUD fight the dollar rising tide??? We may have a recession ahead but inflation is all the rage for now.
Did you see South Korea CPI? Off the chart despite subsidies & price cap!
Did you see South Korea CPI? Off the chart despite subsidies & price cap!
Let's start with EM Asia inflation:
*South Korea June CPI rose to 6%YoY from 5.4% in May. Core CPI rose too to 4.4% from 4.1 so higher. CPI is due to higher transport costs as well as utility and food. Household goods & service increased too!
*Utility hikes to keep CPI high...
*South Korea June CPI rose to 6%YoY from 5.4% in May. Core CPI rose too to 4.4% from 4.1 so higher. CPI is due to higher transport costs as well as utility and food. Household goods & service increased too!
*Utility hikes to keep CPI high...
*Korea growth indicators remain resilient so you got demand and supply shocks & don't forget that South Korea got both food & fuel deficit (see chart).
Actually the largest food + fuel deficit as a share of GDP in Asia but manufactured goods help offset.
Actually the largest food + fuel deficit as a share of GDP in Asia but manufactured goods help offset.
Still, even with all that surplus of manufactured goods, South Korea faces higher input costs & the depreciated KRW doesn't help. Btw, it has subsidies + price caps but still can't keep the lid on inflation. Meaning, it would be worse without. Also Korea has min wage hike in 2023
Reserves are falling across Asia, even in an excess saving place like South Korea but it's wearing down its savings and thank god it has plenty. You know what happens when u're not ready - see Sri Lanka. So we're not concerned about SK as it has many levers to pull & i'll be fine
Meaning, we're likely to have a cyclical downturn in South Korea from higher rates, weak Chinese demand, and the downturn of the semiconductor cycle + electronics, we got more vulnerable countries to worry about. Which one? Well, the Philippines got CPI today. Let's talk about it
CPI beats expectations and rose 6.1%YoY in June from 5.4% in May.
Okay so what? Well, the BSP is very dovish. Hiked only 50bps so far and said it'll hike only 25bps per meeting & swim against the Fed tide.
But but but the Philippines is vulnerable. How vulnerable? Well...look
Okay so what? Well, the BSP is very dovish. Hiked only 50bps so far and said it'll hike only 25bps per meeting & swim against the Fed tide.
But but but the Philippines is vulnerable. How vulnerable? Well...look
Unlike South Korea, the Philippines does not have manufactured goods excess to offset its huge food + fuel deficit (not to mention a yawning fiscal gap.
And? So the peso doesn't like this. Why?
And? So the peso doesn't like this. Why?
First, fiscal spending has been meager due to election held back. So more coming. On top of this, essential imports are expensive & remittances aren't growing fast enough. On the capital side, real rates more negative w/ higher CPI so capital outflows. So? Peso doesn't like it.
The higher CPI has called Medalla (incoming governor) to SOUND MORE HAWKISH.
And I called for this. I have been saying that the BSP won't stay cool with CPI running hot and the peso will force its hands.
What did he say today? "Won't match Fed but can't totally ignore it."👈👈
And I called for this. I have been saying that the BSP won't stay cool with CPI running hot and the peso will force its hands.
What did he say today? "Won't match Fed but can't totally ignore it."👈👈
I already said this in the previous thread so read it. And guess what? The Thai baht is also one to watch. I said this and will say this again - something has got to give. You can't fight the Fed without consequences if u're vulnerable on the import side.
Can't be cool like a cucumber if your CPI is running hot and people pissed off. Lesson number 1 for the Fed and will be a lesson for EM until it takes heed. Ok, Thailand said it'll postpone its CPI release w/o reasons. But we know it'll be higher than 7.1%. Real rates so negative
The Thai baht doesn't like what it sees. It doesn't like deeper real rates with the USD real rates going higher or the Fed laser-focused on making USD real rates higher, irrespective of a higher odd of hard landing or not.
Right???
So? Well, something has got to give. CPI. Key.
Right???
So? Well, something has got to give. CPI. Key.
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