2011-05-13 16:55 
SINGAPORE, May 13, 2011
/PRNewswire-Asia/ -- Steen Jakobsen, Visiting Chief Economist of
Saxo Bank; and Andrew Robinson, Market Analyst of Saxo Capital
Markets jointly published a report on China's economic outlook. The
full report is as follows:
"China - Still
walking the tightrope between inflation and growth?"
Steen Jakobsen, Visiting Chief
Economist, Saxo Bank
Andrew Robinson, Market Analyst, Saxo Capital Markets
China's politically-sensitive trade
surplus ballooned to US$11.4 billion in April as exports hit a
record monthly high. Exports rose 29.9 per cent year-on-year to
$155.7 billion. While exports to the rest of Asia remain strong,
exports to US (+25% y/y) and Europe (+27% y/y) registered slower
growth than in March. The volume peak is due to global slow-down in
growth.
Lower imports were a main driver for
the rebound in the trade surplus and would appear to confound the
long-term aim of increasing domestic consumption. However, we feel
that the rest of Asia need not worry about the slower Chinese
imports this month as they seem to be reverting back to mean levels
going back to 2004 (even with the 2009-10 volatility).
The sharp rebound in the trade
surplus provided more ammunition to the US in the midst of the
US-China Strategic Economic Dialogue as it tries to persuade China
that huge global imbalances are linked to its currency policy. US
Treasury Secretary Timothy Geithner's push early in the dialogue
was a repeat of previous meetings where China's need for a more
flexible exchange rate and more open capital markets was at the top
of the economic agenda.
Even though the Yuan has
strengthened five percent against the dollar since last June when
Beijing pledged greater flexibility -- the gains have come about
during a sustained period of US dollar weakness and these gains
have not been matched against other currencies -- notably the EUR
and JPY.
There are still cries from some
critics who claim the Yuan is undervalued by as much as 40 per
cent. The United States has been the lead singer in a chorus of
international calls for a stronger unit, claiming China's currency
control gives its exporters an unfair trade advantage by making
their products artificially cheap. China's commerce minister Chen
Deming said the forex argument over the trade issue between the
world's two largest economies was "not founded" and the way to
resolve the trade imbalance is to encourage US exports to China and
not restrict Chinese exports to the US.
There is still some doubt whether
the US pre-occupation with forcing a stronger Yuan on China will be
the be-all and end-all to solve global imbalances. However, recent
PBOC comments suggest they are more approachable to Yuan
appreciation as "another" tool to use in its inflation fight.
Inflation is currently still the
main concern for China. The April CPI report is expected to show
inflation considerably above objective of 4%-ish and using GDP
deflator the true inflation levels are closer to closer to 8% than
6%.
Despite China hiking rates 4 times
since October, accompanied by other significant moves in reserve
ratio requirements, there is clear risk that China has done too
little to contain inflation. While this may be understandable as
they are trying to maintain growth momentum and securing a
potential soft-landing, it also has its dangers as 'hot money'
continues to flow into China.
We do feel that there will movement
in China's forex policies towards a stronger Yuan going forward as
it will help contain inflation. There is also a need to increase
access to foreign holdings for the Chinese as this will also help
in the fight against inflation.
We have also seen China banks under
pressure to control loan growth, and the banking system needs to be
modernized in product range to cater to the increasing need for
diversification by Chinese companies and individuals which would
also help alleviate pressure on inflation.
Disclaimer:
Saxo Capital Markets Pte. Ltd.
("Saxo Capital Markets") is licensed as a Capital Market Services
provider and an Exempt Financial Advisor, and is supervised by the
Monetary Authority of Singapore.
At the time of writing neither
the author(s) nor Saxo Capital Markets holds any shares in
securities mentioned in this Article.
The author(s) and Saxo Capital
Markets are not responsible for any loss arising from any
investment based on any recommendation, forecast or any other
information contained herein. The contents of this publication
should not be construed as an express or implied promise, guarantee
or implication by Saxo Capital Markets that clients will profit
from the strategies herein or that losses in connection therewith
can or will be limited. Trades in accordance with the
recommendations in an analysis, especially in leveraged investments
such as foreign exchange trading and investment in derivatives, can
be very speculative and may result in losses as well as profits, in
particular if the conditions mentioned in the analysis do not occur
as anticipated.
You should carefully consider
whether trading in leveraged products is appropriate for you in the
light of your financial circumstances. You should be aware that
dealing in products that are highly leveraged carry significantly
greater risk than non-geared investments such as share trading. As
such, you could both gain and lose large amounts of money. You may
sustain losses in excess of the moneys you initially deposit and
also in excess of the margin required to establish and maintain any
positions in leveraged products.
For further information, please
see:
http://sg.saxomarkets.com/about-us/general-disclaimer
About Saxo Capital
Markets
Saxo Capital Markets Pte Ltd is a
wholly-owned subsidiary of Saxo Bank A/S, the
Copenhagen-headquartered online trading and investment specialist.
It serves as the Asia Pacific headquarters and holds a Capital
Markets Services license from the Monetary Authority of Singapore.
Saxo Capital Markets also holds a Commodity Broker licence from The
International Enterprise Singapore.
Clients can trade Forex, CFDs,
Stocks, Futures, Options and other derivatives via SaxoWebTrader
and SaxoTrader, its leading multi-asset online trading
platforms.
SaxoTrader is available directly
through Saxo Capital Markets or through one of its institutional
clients. White labelling is a significant business area for Saxo
Capital Markets, and involves customising and branding of its
online trading platform for other financial institutions and
brokers.
In 2010, Saxo Bank was awarded "Best
Online Trading Platform" by Shares magazine. The Institutional arm
of the business also won "Best White Label Solution Provider" by
World Finance and "Best Re-labeling Platform" by Profit and
Loss.
For more information, please
visit www.saxomarkets.com.sg
About Steen Jakobsen, Chief
Economist, Saxo Bank A/S
Steen Jakobsen was appointed to the
position of Saxo Bank's Chief Economist in March 2011 after two
years' absence. During that period, he served as Chief Investment
Officer for Limus Capital Partners. Prior to his departure in early
2009, Steen was with Saxo Bank for almost nine years as Chief
Investment Officer.
Steen has more than 20 years of
experience within the fields of proprietary trading and alternative
investment. He started his career at Citibank N.A. Copenhagen and
moved to Hafnia Merchant Bank as Director, Head of Sales and
Options. In 1992, he joined Chase Manhattan in London as VP, Head
of Scandinavian Sales, and then the Chase Manhattan Proprietary
Trading Group. In 1995, he worked as a Proprietary Trader and Head
of Flow Desk at Swiss Bank Corp, London before joining Christiania
(now Nordea) as Global Head of Trading, FX and Options in 1997.
Steen was the Executive Director in the Global Proprietary Trading
Group of UBS New York in 1999.
Steen studied Economics at
Copenhagen University.
About Andrew Robinson,
Market Analyst, Saxo Capital Markets
Andrew Robinson has close to 30
years of experience in the financial markets and worked in key
financial centers in London, Europe and Singapore. His expertise
lies in FX , short-term interest rate products and precious
metals.
Andrew joined Saxo Capital Markets
in 2008 and currently writes a daily market commentary for the
Asian FX trading session. He also contributes regularly to the Saxo
Capital Markets' blog (http://saxocapital.blogspot.com/)
and contributes articles with an Asia perspective to regional print
media.
Andrew is a regular contributor on
CNBC, Bloomberg and Thomson Reuters.
Media contacts:
SOURCE Saxo Capital Markets Pte
Ltd
