Lesson #1: Don’t engineer an outsize credit boom into a global tightening cycle. Lesson #2: Current account-based estimates of FX fair value are really important. Lesson #3: After a decade of G-3 monetary easing, EM has a positioning overhang. Lesson #4: Imposing a tariff on China is a negative shock that weakens the RMB. Lesson #5: Don’t get hung up on stories the Fed is shifting hawkish. It isn’t.
In our last edition of Sticky Notes in 2018, we look at President Xi's reform anniversary speech, Venezuela's future, NAFTA termination, oil markets, and a potential U.S. government shutdown.
On December 17, 2018 the IIF responded to the IAIS Application Paper on Proactive Supervision of Corporate Governance.
We have introduced a new measure of real money positioning in EM, which extends the IIF’s well-known work on capital flows to positioning. Our positioning data are calibrated to match stock positions in the BoP, so by construction are representative of the full positioning picture.
Growth has rebounded, driven by higher copper prices and robust investment. Ongoing reforms will help reduce the fiscal deficit and stabilize public debt. High external corporate debt poses challenges, but several factors mitigate risks.
Trade finance is a business line ripe for innovation, and Mike Hogan (MUFG) and Richard Chenga-Reddy (Standard Chartered) join FRT to discuss how to modernize, with a fascinating case study in Japan and many opportunities for distributed ledger technology (Brad Carr).
The Heat Map is constructed to compare relative vulnerabilities across countries and is used for analyses in our publications such as the Global Economic Monitor and Capital Flows Report, in particular to assess' the cross-country impact of higher risk aversion or increase in Fed policy rates, especially in EMs with external vulnerabilities and less credible policy frameworks.'
The December 2018 IIF Global Regulatory Update provides updates on current work streams in regulatory capital, recovery and resolution, accounting, cyber security, digital finance, sustainable finance, AML/CFT, insurance, and upcoming events.
Sentiment on oil prices remained weak amid doubts that the planned production cuts will be enough to rein in oversupply, and as investors suspect that OPEC+ would honor their pledge to cut production. We expect Brent oil prices to average $67/bbl in 2019 if the OPEC+ agreement is fully implemented.
U.S.: $1.5tn in student loans present fiscal risks; $1tn in leveraged loans vulnerable to rising interest rates ; Banking flows to the UK weaken since the Brexit referendum; Inflation under control in most key EMs; but central bank independence under scrutiny in many countries; RMB gains as a global reserve currency; foreign investor demand for bonds shifts from China to other EMs