Saturday, March 20, 2010

India's interest rate increase hurts the market?

March 20 (Bloomberg) -- India’s central bank will probably raise interest rates again next month as the first increase in two years is only the initial step in the battle against inflation, BNP Paribas SA and Standard Chartered Plc said.

The Reserve Bank of India yesterday increased the benchmark reverse repurchase rate to 3.5 percent from a record-low 3.25 percent and the repurchase rate to 5 percent from 4.75 percent, saying containing inflation has become “imperative.”

Governor Duvvuri Subbarao’s move comes after Australia and Malaysia increased rates this month, while Norway and Israel did so at the end of last year as the global economy’s recovery from the worst recession since World War II gathers pace. The World Bank indicated this week that China should also act to help contain the risk of a property bubble.

Read on:

Interest rate hike is signaling the economy is on a firmer footing. The recent months of Baltic Index though has been volatiles but the trend is clear - UP!

The global industrial company like GE is making new highs.

The economic sensitive index like Dow Jones Transportation is making new highs.

The interest rate disparity between emerging economies will eventually fuel carry trade though emerging markets have not make a new high yet(still in correction mode).

Commodity has not been able to make any new high yet, partly due to US$ strength.

There are still a lot of worries out there. The China's property bubble is one of them. How worried should we get?

Certain cities like Sanya and Haikou price appreciation resemble like a hockey stick there, is vulnerable to correction. Other cities are still looking reasonable.

The other worry that people have is potential trade war between the US and China. The tug of war started with politicians now spread to top notch economists, between Paul Krugman and Steven Roach, man this is fun!.

March 19 (Bloomberg) -- Morgan Stanley Asia Chairman Stephen Roach said that Paul Krugman’s call to push China to allow a stronger yuan is “very bad” advice and that increased Chinese spending is a better way of reducing trade imbalances.
“We should take out the baseball bat on Paul Krugman -- I mean I think that the advice is completely wrong,” Roach said in an Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China. “We’re lashing out at China rather than tending to our own business,” which is raising U.S. savings, Roach said.

Yeah, climb baby climb, wall of worries.

Where are we? Right here :)

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