China
and the Renminbi
I predicted a mixed year for China in
2011- somewhat a state of flux. Although I did think there was potential for
fraud or illusion in the Renminbi chart in the summer.
2012 saw the perfection of the Uranus
square in the Chine chart. All change. I saw challenge to existing leadership
tempered by diplomacy. I saw new regime (evolved or changed) by the end of the
year. Don’t forget I was writing in mid 2008…..
And in fact of course there was indeed
a perfectly civilised transfer of power to Xi.
Or. as the Telegraph put it, ‘The Chinese Communist party has just been
through its most interesting year since 1976’
In
the context of China a leadership change is major change however initiated and
we look with interest to the future.
I also thought that China might reach
a significant point in economic position re US by the end of the year too. Well
only so far as the OECD announced that by 2016 China might exceed US
economically. As far as I am concerned that shows the change in the balance I
expected.
With the Renminbi I predicted a
consolidation that would get a grip on its international value. Managed
revaluation continued as did discussions about trade in the currency outside
China. China does appear to be slowly moving to having RMB a globally
recognised alternative to the dollar. And in late
November China
Construction Bank became the first Chinese bank to issue
a bond denominated in renminbi in London.
90% (85 for RMB and 95 for politics)
Shanghai Composite
I predicted
a positive summer (actually not so much though July was good) and volatile last
quarter (yes) in this market in 2011. Falls were specifically predicted in
September (Yes it did)
In early
2012 I thought there would be confusion and misinformation but optimism and the
markets rose into the end of Feb.
I predicted
the start of big re-evaluation of fundamentals after this and that the changes
in the country would impinge on the index in the long run and that it would be
generally positive. I saw a turning point in July, less in overall market value
more in long term credibility of companies surviving into 2013. The market
actually fell throughout the whole of the second half of the year which doesn’t
in itself suggest positives. But it
improved over the full year, China Securities issued over 70 new policies in
2012. And there was view that the markets had finally stepped into the new
times of “survival of the fittest”.
So pretty
much full marks for my China forecasts then!
95%
Hong Kong Dollar
Ok I stick
my neck out on this forecast and predicted that the currency would disappear by
the end of 2012. Wrong! Although the changes in the Renminbi already discussed
might pave the way for this later..
My chart
showed a key point around May 2012. The only noteworthy event was that Prof Joseph Yam, the
former head of the Hong Kong Monetary Authority (HKMA), recently published a
working paper suggesting a review of the dollar peg. Although rejected by the
HKMA the paper did ignite the debate about the currency’s future and
commentators suggested a link to the RMB was more likely, which I suppose
counts as a forecasting win if a muted one.
55%
Hang Seng
As I’ve said
before this index is dominated by a few companies and therefore is likely to
reflect events in certain sectors/overseas etc.
I saw the
second half of 2011 as being positive for the index. But the second quarter was
very tricky, with a big drop in both July and late September, even though the
last three months ended up a little.
2012 I
predicted the themes would continue. With a bit of a boom (volumes more than
prices) around May 2012 and continued momentum throughout the year with a key
moment around August. My only reservation was around the end of the year.
It was
indeed a good year for the index. However my forecast of a key positive point
in May was ill founded. This represented the most significant fall of the year
due to external Eurozone issues. And no problems developed near the end of the
year either. While the overall trend was right I don’t feel I called the turns
well on this one.
Hong Kong therefore
gets my forecasting thumbs down.
40%
Japan and the yen
My forecasts
for the country were very briefly positive for summer 2011, with a return to
the issues that caused the spring problems by September. This was sort of true,
as following Fukushima resolution there was a period of relief that it had not
been even worse before the real underlying problems were addressed.
Years of
political paralysis continued after the disaster, with Naoto Kan resigning as prime
minister in August 2011. He was replaced by Yoshihiko Noda, who became
the country’s fifth new leader in six years.
I expected
better news economically by November; although the underlying situation would
remain challenging there could be signs of change in its global economic
activity. In fact
the Economist reported that Corporate Japan was on an overseas shopping spree.
Japanese firms spent a record $80 billion on some 620 foreign companies in
2011, according to Dealogic
However in
2012, I felt that there was still an underlying lack of direction/resolution Nevertheless
I expected that things would be looking more positive and there could be
attempts to improve the long term position in the first part of the year.
I expected
the situation and external events to start to spoil any changes towards the end
of the year. And so it proved with The Bank of Japan embarkeing on more easing steps in the first quarter, and
good growth in Q1 and lower growth in Q2. The accuracy continued with the
BBC saying in November ‘Japan's economy contracted
in the July to September quarter, as a global economic slowdown and anti-Japan
protests in China hit exports, while domestic consumption remained subdued. Then a drop in November production exceeded
all forecasts. In the end Mr. Noda dissolved the lower house of Parliament, setting the scene for elections in
December 2012 which elected the LDP.
For the yen
I predicted some weakness in May to July 2011, although I qualified this by
saying it was only in the general scheme of things rather than in the way of
other currency weaknesses. Interestingly the Yen continued to strengthen against
the Dollar but fell vs. the Swiss Franc and the non-Euro/Dollar currencies at
this time.
I went for
appreciation in most of the second half of the year but with a reduction in the
trend in the last months. This proved pretty much spot on (no pun intended) vs.
the dollar
In 2012 I
saw the Yen being depressed after a flat January until about May, with a stable
position till august. Then some weaker months around October and into a more
challenging December when the fundamentals would be under review. Again – almost exactly right and all the more
impressive to spot the shift in direction vs. the dollar after years of
appreciation.
90%
Nikkei
Mostly I saw
the Nikkei being depressed in the latter half of 2011 with some summer
volatility and a small rally in August followed by more volatility in difficult
trends. And this wasn’t far short of the mark. The Nikkei even fell below its
March (earthquake) lows in the November.
In 2012 I
saw early volatility being positively subdued through March but overvaluation
by April with no trend throughout the summer – I said being out of the marker
would be no loss either way between April and September. Sure enough the market
stuttered in January, rose to the end of March (I was a little off on the exact
turn) then fell again into a series of fluctuations until November.
However, while I noted that Saturn would cease to be a problem in
October, I didn’t anticipate much change in the last months when in fact the
market rose considerably – over 20% in 6 weeks as the Yen fell. Although
obviously if you had followed the forecast you would have been back in the
market after September and benefitted from this. Also in the scheme of my
longer term forecasting the market has only returned to around pre-earthquake
levels so predicting a boom would have been misleading.
75%
India and Rupee
There was a
real evolutionary feel to my forecasts for 2011-12 with major rolling power
issues to contend with throughout rather than separate themes per year.
I forecast
that June 2011 would see a change in India’s focus such as its [international]
relationships and that there would be increasing issues related to the balance
between political and corporate interests by September. I expected a change in
the balance of power in November 2011.
There was in
fact increased emphasis on environmental health with the formation of a Green
Tribunal. . Attempts were made at legislation due to
corruption scandals etc. especially in November but they were hampered, and
of course the growth rate for the year was lower than expected due to the
international economic situation. , The Sun/Pluto aspect also
manifested in November when an Indian representative was elected to head the Joint Inspection Unit, the UN’s only external oversight body
In 2012,
although there would be opportunities, India was also to be affected by the Pluto
Uranus square meaning challenges. I expected strict policies to be implemented
by September – many relating to corporations and that these would begin to take
effect in the last quarter.
In practice the increasingly number of
scandals relating govt license sales etc. did result middle class protests and
in the government trying to implement policies despite opposition including loosening
caps on foreign direct investment in some sectors. India also suffered one of
the world's worst power blackouts ever, in July
Monetary wise in 2011 I forecast and
more financial restriction leading to a stabilisation of reserves by the year
end. Some relaxation was expected in the currency by April 2012 and more
stability overall by the end of 2012
The rate was
in fact increased 5 times between May and November 2011 and reduced it in April
2012 making no more changes in that year !!!
RBI latest interest rate changes
|
change date
|
percentage
|
|
April 17 2012
|
8.000 %
|
|
October 25 2011
|
8.500 %
|
|
September 16 2011
|
8.250 %
|
|
July 26 2011
|
8.000 %
|
|
June 16 2011
|
7.500 %
|
|
may 03 2011
|
7.250 %
|
|
march 17 2011
|
6.750 %
|
|
January 25 2011
|
6.500 %
|
|
November 02 2010
|
6.250 %
|
|
September 16 2010
|
6.000 %
|
90% (80 for politics and 100 for the rate
changes)
I foresaw a
wait and see attitude through summer 2011 and restructuring in October November
leading to another wait and see period at the year end. I expected 2012 to
start mixed, leading to a bit of a boom in June and positive direction by
August – with the latter part of the year solid .I
In actuality
– there was pretty much no action from June to August 2011, then falls in
September and fluctuations in Oct/Nov with no direction. In 2012 I did miss a
rise early on although this was eliminated by May. There was not such an
increase as I expected around June and August (although the market rose in
both) and a very solid end to the year.
65%
India/Pakistan relations etc.
I didn’t
find much correlation between Pakistan and India’s charts in this time
suggesting that whilst tensions might remain internally, those between the 2
nations would not be notable. And so it proved.
I thought
May 2011 would be tricky and highlighted July as a watch date in India.
Although May was not notable July saw 26 killed in blasts in Mumbai but a
change of focus by year end towards Corporations.
In Pakistan
I expected the latter months of the year October on to be more difficult than
June-Sept. In fact the level of violence was fairly constant throughout.
However post OBL killing relations with the US deteriorated over this period
In 2012 I
had nothing to add to India than I had already stated economically. In Pakistan
I expected continuing challenges to any ability to govern, and obviously the
country’s political and economic woes
continue. The Prime Minister resigned and was replaced in May/June Elections
are due soon, although these are full term elections.
75%
South Korea
I expected
the economic situation in SK to already be difficult by mid 2011 with no
significant improvement until 2012. I expected the first three months of 2012
to be strong economically and politically. However I thought that there may be
some unexpected events later in the year and perhaps technological glitches.
2011 was
worse in GDP growth terms than 2010, although still better than in 2008-9:
exports were lower than planned. 2012
was not much better however as exports continued subdued to the global effects.
However the upside was that inflation had moderated to a 12 year low by the end
of the first half of the year. The bank of Korea repeatedly cut rates.
I am not
sure about glitches – the only ones I could find were related to the attempt to
launch a space rocket rather than in products or web experience. Of course the
biggest unexpected SK event was the
global success of Psy’S Video.
65%
North Korea
NK is always
a difficult country to comment on as news is rare and unreliable. So validating
my forecasts can be hard
I saw a
turning point in the country around July 2011, and the start of a new era from
August – suggesting that there might be more inclination for conflict then or
the start of a more open approach to the world. Not frankly very helpful not to
be able to decide between the two was it?
As it were
tensions from 2010 to early 2011 calmed down in this period. I expected a big
surprise at the end of the year. Hmmmmm. Quite! On the 17th of December 2011
the Supreme Leader of North Korea,
Kim Jong-il
died from a heart attack and was replaced by his son Jong-Un
In 2012 I
expected the first half to be very tricky with definite potential for
aggression- with problems in June/July too but with more stability later in the
year.
Having
finished mourning there was an aborted rocket launch in April which did not go
down well with the international community. An army leader was deposed in July.
There were also major floods in July.
Given my
uncertainty as to whether this would be aggression or openness it is hard to
say whether these represent fulfilment of the predictions or not!
70% (50 % generally but a bonus for the Dec
surprise!)
Indonesia
I didn’t
spend much time on Indonesia and forecasts were sparse.
I though the
currency might do well in 2011.Otherwise my forecast for later 2011 was for a
tough business and or political environment. In 2012, other than a possible
military clampdown in May I didn’t predict much other than more of the same.
The brunt of fallout in Indonesia from the global turmoil was
borne by financial market, led by the stock and bond markets, while impact on
the real sector was comparatively minimal. In the financial sector, the
decision by some investors to pull out foreign capital during the second half
of 2011 put pressure on the rupiah, Government bond yields and share prices. However As of 2011 labor militancy
was increasing in Indonesia with a major strike at the Grasberg mine and numerous strikes elsewhere and in
terms of poverty and healthcare it is still developing slowly. Apparently this
is because Indonesia’s struggle against the vested interests of the economic
elite, which often distorts or adversely influences government policies, is
generally ineffective or unsuccessful. In 2012 its GDP grew by over 6% but the
structural difficulties in the background are what show in my forecast.
Not May but nearly …on June 8, 2012, the Indonesian Police told AFP that one person
was killed and 17 wounded when Indonesian soldiers opened fire on civilians
after a deadly dispute sparked by a road accident in Papua province. But the
bigger clampdown in 2012 in the end turned out to be economic protectionism (ban
on metal exports among other things).
55%
Australia
I saw the
emergence of conflicting factors in Australia in 2011 after a benign few years.
I saw a critical point in October but a bit more stability for the currency by
December.
In early
2012 I saw the beginnings of some real economic issues. And a potentially politically serious time in
March/April tempered by the still moderately pleasant backdrop. I expected sudden policy change in July an
impact on the commodity industry by September. Leadership challenges were
expected around October with the picture continuing at the end of 2012.
Sue enough
while Australia remains a success story among Westernised economies, however tourism
and exports are suffering due to the A$ strength and the growth rate started to
fall in 2012. House prices fell and the
central bank cut rates right down again and with more stable commodity prices
the mining boom is stalling.
Commentators see all this as a sign of the end of the good times.
In Oct 2011
there were some protests and strikes but other than a number of state elections
there does not appear to have been any key new political issues around October
2012.
As to the
commodity shift -in late August 2012 BHP Billiton, the biggest miner in the world, froze plans to expand the
vast Olympic Dam mine in South Australia, citing the rising costs involved, as
profits fell, one of a number of indicators that things were indeed changing.
Although
volatile on a daily basis, looking at longer terms trends we see that the currency
did in fact begin to settle into to a range vs. the us dollar at the end of
2011.
90% (economically pretty perfect – one
political miscall).
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