Once more unto the breach! Our mentor has to attend to a sad loss in the family in Hong Kong, which may take his time for a few days. I have offered to step in to blog for him.
If you will go to:
http://anatrader07.wordpress.com/2011/01/
you will read a few blogs pertaining to global outlook for 2011 by a couple of banks.
Last night I attended another dinner talk by RBS Coutts at the Mandarin Oriental and the common denominator is there for the global outlook in 2011.
However, the speakers have put emphasis on Forex and Commodities which I would like to relate hereunder.
Forex
In their view, there will be rebalancing focus on re-alignment of relative currency values. They expect the strengthening trend of Asian currencies relative to those of developed market currencies, such as, USD and EUR. This is expected to continue and probably accelerate in 2011.
This global rebalancing will be in fits and starts and at times at high levels of volatility.
Commodity currencies should continue to perform well. Canada’s economic links to the US might see its underperformance versus the Australian dollar.
They expect strength in Asian currencies to be led by the Chinese Yuan, with 5-7% appreciation against the USD. The Korean Won should also appreciate meaningfully in 2011.
On Singapore’s open economy geared to global growth and its use of the SGD as an explicit tool to manage domestic inflation, The Sing Dollar is poised to perform well again in 2011 as its inflation has reached its cyclical peak in late 2010.
Commodities
Gold still stands to win in their opinion. There is jewelry demand in emerging economies of India, China and the Middle East. The targeted price could reach USD1600 per troy ounce.
Copper also fares well providing a pro-cyclical exposure than the risk aversion exposure of Gold. Demand for copper is directly linked to prosperity, with spot price rising 150% over the last 6 years. They expect copper price to rise higher in 2011.
They are less keen on oil. The short term upside is limited due to the futures market.
Conclusion
The QE2 in the US combined with the fiscal stimulus might mitigate the imminent risk of a relapse in US economy. Europe faces political as well as economic challenges.
China has failed to designate a new vice-chairman of the Central Military Commission in 2009, which typically should be appointed 3 years prior to the leadership transition.Policy discord running up to the 2012 transition may raise policy error in China.
The ASEAN elections such as in Thailand, Malaysia and Singapore are expected in 2011.
Singapore does not pose any problem but the post-election may see aggressive policies to contain growing asset prices.
IDKIT aka Ana
Ag Moderator
The Living Years
http://www.youtube.com/watch?
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