Daily Times

PERUSE ECONOMIC HISTORY TO BUTTRESS SELF CONFIDENCE.

If you want to comprehend the economy of the country, read history and assimilate the culture in your brain. I can easily say it’s quite rudimentary for the learner of economics. Unfortunately American negotiators are poor at history and culture. In-fact the American policy makers are bad at economics, investment and finance. University of Chicago Booth can help them understand the basics of economics and finance. Some people feel jealous of china’s success and cannot accept the rise. I was talking about Chinese currency Yuan on Jan 7-2011 in New York and about Petro Yuan in November 2014 in Kuala Lumpur. Some of my naïve classmates from Chicago Booth were surprised and thought I had gone bonkers. Credibility matters in the end.

Business sentiment is negative in USA and that’s a forward indicator. Oil prices are down precipitously [56% decrease] in the last 2 months from all time high of $86/barrel on October 2-2018. We have witnessed the stocks commenced selling off in October-18 and investors are looking for the premises. Is it Trade war? Interest rates? Yield curve? Inflation? Debt?

Both economies are slowing down and feeling the pressure of the trade skirmishes. US equity market is bleeding, down by 23% last year and oozing out negative vibes to the global world. US economy is really finding it difficult to adjust to the market norms at the moment to bring confidence back in to the economy and spur growth. There is a famous saying: if you cannot stand the heat, you should better leave the kitchen. By the way Apple’s [aligned with FAANG ] market cap is below $750 billion [ stock hit $1 trillion market cap on August 2-18] due to weak sales in China in 2018/19. FAANG stocks lost $957 billion in less than 3 hours on November 20-2018. I still remember the bloodbath dates vividly.

US economy cannot take the pressure of higher interest rates at present. If interest rates are hiked in March 2019, I would not be surprised that economy heads to deflationary recession. Wrong move

GLOBAL VIEW OF THE ECONOMIES: STRATEGIC PERSPECTIVE.

USA and China will start their trade negotiation on Jan 7-2019 after the announcement of 90 days truce in December 2018. Who will be in the driving seat at the end of the negotiation? Your guess is as good as mine. Surmise but with market intelligence report. Both Central banks FED and PBOC are under the limelight to make the strategic manoeuvring to deliver economic outcomes.

FED IS UNDER THE SPOTLIGHT AND IMMENSE PRESSURE.

FED Chair Powell is under pressure from President Trump to remain dovish tone instead of hawkish tone. Raising interest rates further will lead the economic malaise and putting the recovery in jeopardy. In my opinion, US economy cannot take the pressure of higher interest rates at present. If interest rates are hiked in March 2019, I would not be surprised that economy heads to deflationary recession. Wrong move.

PBOC MOVES STRATEGICALLY TO KEEP THE GROWTH INTACT.

On the other hand, China’s central bank PBOC has been following prudent steps to ensure that growth momentum is solid. Tax to GDP ratio is growing in a steady manner and trending higher. PBOC has cut rates in August-18. Chinese central banks is moving very cautiously in these turbulent times amid trade escapade.

WHERE THE MARKETS STAND: CHINA LEADS THE WAY!!!!

China is the engine for growth story in the modern economic era. Pick up all the companies: Ford, Apple, Starbucks, Dell, Microsoft or Nike. Chinese middle class spending is a real boost to the domestic consumption and global companies. Most of the American companies’ revenues stream is attached with Chinese growth and the economy benefit. Not India unfortunately. India’s economy cannot even come close to Chinese economy. China is the new global and economic power with strong leadership under President Xi Jinping.

While discussing with my friends in the corporate circles in Singapore, Kuala Lumpur, Dubai and London, I have few points to share with my valued readers by analysing the TRADE issue professionally without bias and emotional factor. Rationally speaking.

1. China has made some strategic moves to spur domestic growth. She has lowered reserve requirements which mean more credit for the economy.

2. China has lowered cars tariff and introduced rule to protect intellectual rights for businesses in the country.

3. Income tax cut has gone into the system for the middle class which is the backbone of the economy.

4. Every policy lever and strategy takes good 12 months to have deeper impact on the economic outlook.

5. Negotiations should be handled by people who fathom the culture and economics from both sides. One of the President Trump’s advisor Peter Navarro has not been to China in the last 10 years. Larry Kudlow talks with substance and facts. How can you negotiate with shallow knowledge and then groaning and moaning in the media and press about China. Delegation should comprise gentlemen with solid credibility in the market.

6. Yuan is the currency for the emerging markets. Petro yuan is used by many countries now. Americans needs to accept the fact of emerging china and can’t contain / strangle china’s economic progression. China’s currency or bond market will not collapse. Hard facts that people need to fathom deeply. Don’t feel jealous of China’s rise.

In my opinion, the whole negotiation would revolve around points 4, 5 and 6 to have meaningful deliberation and take it to the next level where both players can have win-win situation. China is ready to open markets and to have competition at the global scale. This would be quite significant in leading China in the global arena as a major force after her inclusion in WTO in 2001 and bolster the market sentiments towards her. According to our market intelligence, many good things can happen if emotions are in the bag and respect for china is duly acknowledged. Global economy awaits for the massive news on Jan 7-2019.

The writer is a Chief Economist at IQI Global [brokerage house], a leading property and Investment Company operating and advising clients in Kuala Lumpur, Singapore, Hong Kong, London, Melbourne, Bangkok, Makati, Toronto and Dubai [www.iqiglobal.com]. He has 18 years of solid financial market experience in private banking

Published in Daily Times, January 7^th 2019