“With surging foreign-exchange inflows late last year and a possible rebound in bank lending in January, the central bank needs to ratchet up the reserve ratio to soak up liquidity.”
– Ken Peng, Citigroup (as quoted by Bloomberg)
I’ve been steering my clients away from the industrial and base metals for months now and have been fairly vocal in the media about my lack of interest in copper ETFs and the like. Asian economies are not thrilled with the amount of US and European money flooding their financial system and they are actively taking steps to cool things down.
This morning, in an expected move, China once again got a little bit tighter. Asian bank officials have no interest in fighting the inflation wars of Latin America in the 90’s or hosting a Greenspanian Boom/Bust/Boom/Bust orgy like we do here.
The People’s Bank of China has raised the reserve requirement ratio (RRR) by 50 basis points in an attempt to mop up excess cash. This is the seventh such hike since the start of 2009, and comes just over three weeks since China raised the benchmark interest rate.
Lu Zhengwei, chief economist at Industrial Bank in Shanghai told Reuters the rise was expected, and would probably be the last one before Chinese New Year.
Elsewhere in Asia, Singapore announced what Credit Suisse called its “harshest tightening measures” since late 2009 to chill out some of the property speculation in the cities…
Shares of Singapore developers and banks were knocked back Friday after the government unveiled a fresh set of tightening measures to prevent home prices going “beyond sustainable levels,” adding it stands ready to take further steps if necessary.
The measures announced Thursday include a wider imposition of stamp duties on property sales, increasing the rate of the stamp duty and a reduction in the amount of credit available to those who aren’t first-time buyers.
This is rational central bank behavior and responsible government reaction to an overblown buildout in the region. Too much, too fast. We’ll see how the commodity sector stocks react today, my guess is that they need a cooldown as well.