Asia
Japan
My economic
forecast mainly referred back to 2013, and in reality economic trends and
policy were certainly dominated by the QE started in 2013. There is little in
the forecast economically that is worth highlighting. However I noted that
there could be earthquakes in October and in fact Sept brought a volcano
eruption and October a 6.2 earthquake. I also mentioned the possibility of
minor leadership change in December though I didn’t expect a change of
direction. There was no change to the head of state but there was a snap
election to consolidate the policy direction.
70%
Yen
Back to
currencies again and my 2014 worst performances. While I correctly saw that the
Yen trends of the last 2 years would end in early 2014, I thought the currency
would rise in July and August which it did not. On the other hand the expected
fall back in Sept October did happen. The yen’s trend did move in December but not
quite as I expected. 60%
Nikkei
Hong Kong
Dollar
As anticipated, there was no change in the actual position in
2014 but things continued behind the scenes. I expected funds flows and
authority denials in the June to Sept period and in July Hong Kong’s de facto
central bank stepped in for the first time since December 2012 to prevent the
city’s currency from rising against the U.S. dollar due to a significant uptick
in funds flowing ( possibly due to Russia events). Interestingly of all the
currencies I got closest in December with the Hong Kong dollar saying it was
the calm before the storm: with the Swiss decision in January eyes turned again
to this other peg. 80% ( not really
possible to get higher in current conditions)
Hang Seng
I said “The pattern for the first five months of 2014 is
much the same. There is not enough momentum to carry the market much higher and
there is a lot of confusing information that makes investors a little nervous. May
might see some uptick though as there is a burst of enthusiasm. June and early
july are also positive times with increased investment.” All of this was spot
on as was the expectation of further rises in August and a more mixed situation
in September and October .
But I expected the latter part of July to have falls and although my overall forecast for November
and December was more or less right it wasn’t perfect. But overall
the best so far 90%.
China
As forecast things did become somewhat more difficult in
March with the first corporate bond default
and auction fails, weaker statistics and property values and internal
terrorism worries. Some of these having knock-on effects on other markets.
Corruption issues also raised their head as expected, notably in GSK and via
alleged cyber activities.
As expected there
was less bad news by June and it continued as expected throughout the next few
months with even positive news in the PMI in September. However views were
mixed and things were not as good as I expected by October. Indeed this led to
a rate cut in November.
On the other
hand China’s size and position probably support the comments re the longer term
path. But these are hardly concrete enough to merit positive prediction scores.
One thing that does seem to have been accepted is that the leadership is
stronger by the end of the year perhaps justifying my remarks about increased
power. 60%
Renminbi
The first month was as expected relatively calm.
March and April, were expected to be more interesting in
terms of the float and sure enough in mid March the PBOC took steps to widen
the ranges. There is a great deal of pressure building up internally and
externally and the currency has to begin to change its nature. There was also
an engineered 10% decline in the currency around this time.
I expected a bit of
backtracking around July though and this happened in a quite literal way with
the currency rising.
I thought that the period Sept to December while premature to expect a free float – would show
a commitment for the currency to trade
relatively independently in place by the end of this year. In fact the period
showed little trend or activity as the currency took a back seat to the oil and
dollar prices. However while there was no commitment to making it float freely
there is a stated intention to make it a global reserve currency which in the
long run should lead to the same outcome.
85% on the basis that the timing on a statement on commitment of any
type is a good very call.
Shanghai composite
I expected a change in sentiment in March with a volatility
and a net rise but this did not happen.
However I expected that April would show investors re-evaluating and that
after a few months of treading water around July/August there maybe a new trend. And the market did
indeed start to turn upwards in July.
I expected volatility
in September but there was none
November however I expected the amount of trade to increase with the year end showing more interest from the international community. In fact
November and especially December showed a marked increase in value by almost
1/3 which might have resulted from the recently opened Stock Connect program,
which gives Hong Kong investors access to Chinese A-shares.
65% - not great on
size of directions but picking up the precise November change in volumes was
worth a lot of brownie points!
Indonesia
February
was forecast to be a stable month if rather
hard for the government, and this was fairly accurate with Indonesia managing
to sell some bonds and becoming less “fragile”
by March but this contrasted with the beginnings of the election battle.
However
my prediction of tension in the physical environment around March was off,
their major volcano eruption was earlier than this and another later around
June. There was however a focus by April on election logistical problems with
investor concerns over lack of direction and growth slowing
May was forecast to be ok and in fact was
without significant economic events.
The election in July had both parties claiming a win at
first but ultimately Widodo was elected though challenges continued for another
month and the actual government did not start till October.
I expected the underlying issues to be activated again in
August, and growth was the lowest in 5 years. September saw the country under
continued economic pressure particularly liquidity wise and October stats were
not good.
As
expected November was better for the
government with the first major policy actions ( fuel subsidies), and the
impact of external issues ( in actuality cheaper oil) was deemed important in
this long run.
But December’s involvement in external issues had nothing to
do with economics and everything to do with the lost Malayan plane.
50% no really concrete stuff forecast correctly.
Rupiah
I thought that June would see more restrictions, in fact it
saw more depreciation pre-election.
I was right that August would see a boost in trade in the currency and probably
a bit of relaxation leading to more liquidity and perhaps more inflation.
I expected
the themes to continue throughout the remaining months with some impact of
decisions and global events to flow into the currency in the last months (
hardly a genius forecast!). In fact the Rupiah fell back from its election high
and only moved following the fuel policy changes. It is indicative of the lack
of real direction that its path vs the dollar and sterling diverge at this time
– essentially overall it didn’t do much….. 55%
South Korea
I expected the positive 2013 themes to continue in the first
half of 2014 and so it proved with the Won climbing to a six year high in
April. But I thought that the people might feel
restricted where there was more a feeling of sadness following a ferry
disaster.
As expected by June the mood starts to tone down a little
with changes in government following the
disaster.
I expected the final
3 months to see things cooling further, and there were a number of rate cuts
which ultimately led to a falling Won.
But my forecast for the end of the year was not
correct. Overall a poor 40% ( though it is often hard to get detailed
English news on these countries )
North Korea
A country
even harder to get true news on is NK.
I expected in April through June that the new mood would
become more entrenched with leadership challenges continue and the country
seems to lose direction and momentum with increased economic difficulties and a
general state of malaise. Who knows whether this reflects the actual
conditions!! I anticipated unsubstantiated rhetoric which definitely happened (against US and
SK).
As expected there was no news in July and August
September and October I thought would see more purpose and another phase of outward looking
action. There was actually both a visit by officials to SK and some more shots.
Interestingly I forecast that the country would regains some
sense of its power and it turned out that KJU returned to duty after and
absence. I suspect my forecast was closer than it is possible to demonstrate.
November was as expected quieter but December saw the
country accused of a cyber attack on Sony. What I described as “not knowing
what was going on” was in a way true though admittedly not my exact
expectation. 70% ( but possibly a lot more)
As expected early year talk was of the slowdown and the need
for change in May. But also as expected a bit of good news on the inflation
front.
I was also correct that the mood would be positive but
interpreted the reason rather incorrectly, it was the desire for change that
was causing the enthusiasm.
I correctly forecast the change in government, though so did
many others. More notably I identified the possible landslide and although
there is an alliance it was the first time since 1984 when any party had gained
sufficient to govern independently.
As expected in June pre the budget all the talk was of
reforms and how to resolve the economic issues and India started to show some
international muscle rejecting the WTO deal.
I also correctly identified the focus on debt in September as
India started a privatisation programme and the stats were positive too despite
the general acknowledgment that there was a long way to go.
As anticipated it was the last quarter that showed the
beginnings of policy moves ( taxes etc) though improvements by year end weren’t
huge ( confirming my election comment that even the outcome of the landslide
win wouldn’t change things very rapidly)
90%
As expected there was little overall change in the Rupee in
the early months of the year. Indeed there was little trend change between
January 1 and May though there was some movement in both directions. There was
a short uptick in the weeks before the election.
June and July as I predicted was more difficult for the
currency though as I surmised this would
not be on 2013 scale. There was no rate change in August but the currency did
rise again.
September did see movement – but I failed to identify the
direction which wasn’t surprising as it rose rapidly then fell in the space of
a week or so (difficult to spot on a 3 month rolling prediction).
I presumed that policy
changes would support the Rupee in the last 2 months and so it proved although
once again I missed the short term blip in late December. 65%
The index did indeed drag its feet in the first two months
but as expected March was better. The rises were more consistent that I thought
up to the election but there was inertia after it. The change in June to a more
positive outlook and rises in JulyAugust was also right.
Again, as I thought, September did see a more mixed picture but things were back on
track by November. December was however more volatile and less positive than I
predicted. 85%
Russia
Now we are looking at a big one. Oooooh matron!
By the way reviewing this is a bit of relief for me; I don’t
have to go scouring the FT data archives for obscure articles on this country
to confirm my 2014 forecasts as I do for many others!
It is also interesting as it shows how we need to be careful
with our description of positive and negative- do we mean internally ( I
usually do unless I specifically state there is an international element
involved) or internationally.
Anyway I said the
first quarter of 2014 would be ok and the Olympics would be just fine. I noted there
may be some problems but that it wouldn’t hurt the country in the first
quarter. Obviously March brought the Crimea issue but it was too early for the
real issues that month.
I both hit the nail on the head and got it wrong for the
next period. I certainly got the unexpected
events, and the “too much force” but I thought the external view of the
country would be good. It was most definitely not – though there was no doubt that
Russia was strong.
September, however, I
got right as I said the political situation would become more challenging and
the leadership will need to compromise more else create opposition. It was at
this time that the activity in eastern Ukraine become more overt and there were
protests ( peace marches) in Moscow
However
as suspected, despite the more difficult economic conditions, Putin’s approval rating was mostly intact at about
in December. 85% - some
good timing if nothing else!
Rouble
As I forecast after the excitement
of January 2014 February and March were
much calmer months for the currency. Indeed there was really little
change till mid year. I saw background weakness over the summer more than
offset by other factors and so it proved till September.
There were no interest rate changes in August though and
appreciation in early September was minor.
Furthermore there were
interest rate changes October and November and the rouble direction was are more than mixed,
with declines throughout and not just in the latter month.
December, did not see the phase pass at all. With huge
depreciation and interest rate changes though in all fairness I only claim to
be right within 6 weeks either way in these forecasts which don’t take into
account short term triggers.
60% ( for getting the first part right and the
timing of the biggest decline within a few weeks.)
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