Live blogging from my class..please excuse grammatical & spelling errors and the lack of formatting.
Today we have a guest speaker in our "Global Management of Asian Firms" class - Kevin Tay, Chief Investment Officer, UBS - Southern APAC.
These are my random notes from his talk:
1. Eurozone exports as a % of GDP: India (1.9%), China (4.0%), Singapore (11.8%)
2. China's Eurozone exports are mostly Labor intensive. Hence Euro crisis could lead to high unemployment in China.
3. The deep structural problems that Euro zone has will take decades to solve.
4. Monetary policy is effective in normal business cycle while fiscal policy is effective in structural deleveraging.
5. During deflationary phase, bank savings go up and spending drops.
6. Democratic govt's will not be effective during structural deleveraging as they will focus on short term goals and take measures that could be counter productive.
7. Thailand paid back IMF in 6 years. Asia does not have trade unions, maximum work hours, social welfare etc...currency was devalued and Asia exported their way out.
8. Europe has strong trade unions, firing is very difficult.
9. Balance sheet recession : Save 100 out of 1000 every month. People borrow that money and invest ->generate 10% growth. Right now...lending is on very high interest
rates and hence very few borrow. Private sector does not spend and bank savings rise.
10. Credit crunch has started in Eastern Europe, this will now spread.
11. Banks don't want to issue bonds to share up their balance sheet because of very high interest rates.
12. This could all lead to contraction in economies.
13. The way Govts are try to get out of this mess is by spending. The problem is the the troubled govts can borrow only at very high rate.
14. Countries like Philippines, Indonesia have a obligation to help as they received help during the Asian financial crisis.
15. Chinese incentive is that if Eurozone improves, their exports could improve.
16. China wants leadership of IMF and wants Yuan included in SDR- special depository receipts which currently contains Dollar, Euro, Yen, and Sterling.
17. Greeks don't have an effective tax collection system.
18. Italian govts are taking desperate measures to collect taxes.
19. Consolidated claims on Asian banks: European Banks claims/ Total foreign claims : China (40.5%), India (46.8%)...about half of lending in Asia is coming from European banks. Will this lead to credit crunch in Asia. Kevin thinks no...as Asian banks are well capitalized.
20. If Greece exits Euro, several European banks could enforce capital controls and that will send inter bank rates through the roof.
Now it is Q&A. I have one on the potential of Asian Agro businesses. Kevin is positive "Go be farmers" :-)
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