Weekly – Asia some positive news

by: Maritza Cabezas

Emerging market capital flows ()

China’s August export growth remained strong at 7.2% yoy, after already strong growth in July (5.1%). As the global economy picks up, China’s exports are improving. The details show that exports to US, ASEAN, Korea, Taiwan and Hong Kong accelerated. China’s inflation in August remained unchanged (2.6%), leaving room for extra stimulus if needed. Meanwhile, Raghuram Rajan, the new governor of the Reserve Bank of India (RBI) held his inaugural statement last week. A number of important measures were mentioned, but monetary measures would be postponed until September 20 during his first policy statement. As for the banking sector, he would continue with the reforms, which include granting bank licences beginning January 2014 to improve competition in the banking sector. The new measures to prop up the rupee include providing exporters and importers with more flexibility in hedging their forward currency contracts.We think that these measures are positive, but the monetary policy statement will be critical in providing the details for meeting inflation goals and currency stabilisation which are critical in this juncture.