Currency Devaluations by Asian Tigers Could Hinder Global Growth
By LANDON THOMAS Jr.

China’s decision to push the value of its currency lower has opened a new front of worry for global investors: a potential wave of currency devaluations among the so-called Asian tigers — South Korea, Singapore and Taiwan.

Such an outcome, a number of foreign exchange specialists say, would put a further damper on global growth expectations, which already are being revised downward as China’s once-booming economy retrenches.

The dollar’s strong run recently — together with the plunge in the price of oil and other commodities — has damaged fragile emerging-market economies like Brazil, Turkey and South Africa; the dollar has risen 130 percent against the Brazilian real and the South African rand since mid-2011.

The currencies of fast-growing Asian countries, including India, have largely been insulated, thanks to their better-performing economies and their ability to stockpile large foreign currency reserve positions.

But having a strong currency at a time when manufacturing competitors like Japan and China have weaker currencies leads to a sharp fall in exports, which have been the economic lifeblood of these countries for decades.

“These countries have some of the most overvalued exchange rates on the planet,” said Julian Brigden of Macro Intelligence 2 Partners, an independent research firm based in Vail, Colo., that advises large money management firms on global investment themes.

When economies have high exchange rates, their exports tend to lose market share compared with countries with cheaper currencies. And when that happens, countries that depend on foreign trade will frequently take steps to push their currencies lower.

Echoing these fears, the finance minister of Mexico, Luis Videgaray, warned on Thursday that the Chinese currency actions could lead to a new round of competitive devaluations.

The fear is that a currency war in Southeast Asia — where the Asian financial crisis erupted in 1997 — could result in lower growth and add to the already substantial concerns about the global economy this year and next.

Earlier this week, the World Bank lowered its estimate for global growth to 2.9 percent from 3.3 percent, with expectations for just about all major economies being revised downward.

Already, global money managers have begun to pull money out of some of these Asian markets.

The Korean won and the Singapore dollar are down 5 percent, while the Taiwan dollar has lost 7 percent over the last six months. Even in India, perhaps the most popular emerging market among global investors, the currency has given ground, about 7 percent, against the United States dollar.

Underpinning the fears about a currency war have been the disappointing export figures from the region.

For example, Korean exports fell 14 percent in December compared with the same month in 2014. For the year, exports shrank 8 percent — the worst result for the country since the global financial crisis in 2009.

In Taiwan, government officials say they expect exports for last year to have fallen 10 percent; and in Singapore, the manufacturing sector at the heart of the country’s export-based model slumped 6 percent in the most recent quarter.

These export figures are disturbing because they reflect that something deeper is ailing the global economy than simply a slowing China that is buying less oil from Nigeria, iron ore from Brazil or copper from Chile.

Strong currencies in the Asian tiger countries have made their high-end electronic products, like Samsung phones from South Korea and computer parts from Taiwan, more expensive in Europe and the United States, their biggest markets.

And with China, their main export competitor, expected to let the renminbi weaken further, these countries will face further pressure to let their currencies fall.

The sudden export drop-off for manufacturing powerhouses like South Korea and Singapore troubles analysts who see it as a sign that the slowdown in the global economy is worse than people expect.

“I expect these currencies to fall by another 20 or 30 percent,” said Raoul Pal, an independent financial analyst and the founder of Real Vision TV, a media venture where sophisticated investors discuss their views on the market. “These export figures are a big deal — it’s a huge shrinkage in the dollar-based economy, as not enough people are buying goods.”

For quite some time, Mr. Pal has been promoting an investment thesis that the relentless rise of the dollar — since mid-2011, the dollar is up 35 percent against a broad basket of currencies — will have a deflationary effect on the global economy as export-driven economies enter into a series of competitive devaluations to protect crucial export sectors.

“This is not just a commodity story,” he said. “It’s a global trade story.”

Exchange-rate volatility in this part of the world will not take the heat off other weak currencies. In addition to usual examples like Turkey, Brazil and South Africa, investors expect commodity exporters like Indonesia, Chile and Colombia to take a big hit, as the prices for their products continue to fall.

The final frontier in this respect would be the pegged currencies in the Middle East, especially the Saudi Arabian riyal, which is tightly linked to the dollar.

Although Saudi Arabia has been running budget deficits of close to 20 percent of gross domestic product because of the fall in oil prices, it still has a war chest of $635 billion in foreign exchange reserves that it can tap to defend the riyal.

The other problem with downward trending currencies in South Korea, Taiwan and Singapore is that these countries, like just about all emerging market economies, have taken advantage of a rock-bottom interest rate environment to issue billions of dollars in dollar-denominated corporate debt to finance capital investments.

Foreign investors were attracted to the high yields and especially the stable currencies and bought them in huge quantities. Now, with the currencies starting to wobble, dollar-based investors have less incentive to hold on to them, and they will do what they have been doing with their Brazilian, Turkish and South African bonds — get rid of them as quickly as possible.

“There is a lot of underlying investor exposure in these markets,” said Mr. Brigden, the independent research analyst. “I think if things continue to get worse, we are going to move to liquidation stage.”

台韓星將貨幣競貶 全球經濟憂

紐時分析 中國促貶人民幣 鄰國也有動作

紐約時報分析，中國決定讓人民幣進一步貶值，將使台灣、南韓及新加坡等亞洲三國貨幣競相貶值，可能進一步打壓全球經濟成長前景。

由於美元走強，加上油價及其他商品重挫，已經重創巴西、土耳其及南非等新興市場，而這三國貨幣從2011年中時的高峰迄今已至少貶值130%。

紐約時報指出，但台、韓、星等亞洲快速成長國家的貨幣雖也偏弱，但尚未重貶，主因這些國家經濟表現較佳，且有鉅額的外匯存底。

但由於日本及中國等競爭對手競相貶值，已使這些亞洲國家出口劇減。例如南韓去年12月出口額比2014年同期減少14%，全年出口減少8%，是金融海嘯以來表現最差的一年；台灣官方預估2015年出口額減少10%，新加坡第4季出口額則比上年同期減少6%。

報導引述總體經濟情報公司（Macro Intelligence 2 Partners）經濟學家布瑞登（Julian Brigden）指出，這些亞洲國家的貨幣均已高估；一旦這些國家發動「匯率戰」，可能使今年全球經濟成長雪上加霜。

世界銀行年初已將2016年全球預估經濟成長率從3.3%下修到2.9%，幾乎所有經濟體的預估成長率都被調降。

過去半年來韓元及星元對美元貶值逾5%，台幣貶值7%，連印度盧比也貶值7%。現在人民幣又貶，將使亞洲貨幣面臨更重的貶壓。

墨財長：拉美恐受衝擊

【編譯黃智勤/綜合外電】人民幣兌美元匯價墜至四年新低、陸股開年便震盪不斷，墨西哥財長維德加瑞（Luis Videgaray）8日示警，中國恐掀起「反常」的貨幣大戰。

身為第二大拉美經濟體的墨西哥首當其衝，因為墨西哥披索是交易量最大的新興市場貨幣，被市場視為指標。墨西哥披索匯價繼去年走貶14%後，7日再跌至17.72披索兌1美元的歷史新低。

維德加瑞說：「實質的疑慮在於，面對中國經濟減速，各國可能紛紛採取競爭性貨幣貶值的策略回應。」

他認為這樣的前景是「全然反常」的，因貨幣競貶只會讓各國落入相似的處境。

原文參照：
http://www.nytimes.com/2016/01/09/business/dealbook/asia-china-renminbi-currency-devaluation.html

2016-01-09．經濟日報．A8．國際．國外組