After leaving the central bank and taking some vacation I am moving back to the asset management world. So I will post regularly links to articles I find helpful in forecasting trends in global asset prices and currencies. Here we go:

“Dubai: The UAE’s central bank has launched a study into a revaluation of the dirham, the Middle East Economic Digest (MEED) reported late on Friday, citing a bank official.

“There is a study group that has been looking at the effects a revaluation would have for several months now as part of the planning for the long-term strategic future of the bank,” MEED quoted the official as saying.

The group is expected to report the findings at the end of 2008, according to the magazine.”

Bottom line: I can’t imagine that UAE economists will come up with the conclusion that in a global world it makes a lot of sense to peg to the dollar. It is likely that in the coming quarter we will more and more countries do de-peg from the dollar (for economic and geo-political reasons). This may have dramatic global concequences in the long run.

“If you look at the one common thread between places like Ukraine, Nigeria, Brazil, China, India … the emerging markets that are doing well, it is a rising investment-to-GDP ratio, it is rising credit-to-GDP ratios,” said Bhanu Baweja, global head of emerging market currency research at UBS.

These markets are still under-leveraged and credit growth still has a big role to play in the years ahead, Baweja said, adding: “A stable and vibrant banking system has been the crucial part of this upsurge in growth in emerging markets.”

More scrutiny of lending policies and tougher regulation for banking supervision has helped.

Bank credit in Turkey rose to 37 per cent of GDP in 2007 from 24 per cent in 2000, in India to 52 per cent from 32 per cent and in Brazil to 44 per cent from 32 per cent, while bank credit in advanced economies fell to 90 per cent of GDP in 2007 from 93 per cent in 2000, according to the IMF.

A lot of these countries, if you look back 10-15 years ago, some of them were quite credit starved,” said Pedro Fonseca, emerging market bank analyst at Nomura.”

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“Dubai: Per capita consumption of cosmetics and fragrances in the Gulf is one of the highest in the world, with the average purchase estimated at Dh1,229 per head, according to Eckhard Pruy, chief executive officer of Epoc Messe Frankfurt.

  • Is coordinated currency intervention on the cards?. Gulfnews article . A quote:

““We’re on an intervention watch,” Stephen Jen, Morgan Stanley’s London-based head of foreign-exchange research, said. “While I don’t think we have reached the threshold yet, the argument in favour of it is gradually becoming compelling.” [...]

“The dollar’s fall will worry other markets, which are so fragile right now,” O’Neill said. “Intervention will definitely be on the minds of policy makers.”
  • Merill launched exchange traded certificates that give exposure to Chinese companies in interesting sectors (water, luxury etc.). More to come. Financeasia.com article.
  • Baku open a list of dirtiest world cities, see IHT article . Baku opens the list, and interestingly, Moscow is the 14th dirtiest.
  • The Economist asks a question whether central banks can prevent future liqudity crises? And a link to a grand publication by Banque de France on liquidity crisis.