Jun 14, 2008 12:07 AM, Food for thought—an insight- time to pile on cash/wait for investments/do financial closures/feed energy sector

Date: Jun 14, 2008 12:07 ,Food for thought—an insight-time to pile on cash/wait for investments/do financial closures/feed energy sector/reduce dependency on energy
Scenario Study—food for thought
Last two weeks:
Thailand’s inflation rate scored a ten year high with consumer prices rising 7.6% year over year, while in the Philippines inflation is also near a ten year high at 9.6%, and Indonesia now sports a 12.70% inflation rate.
Of course, this all comes on the back of reports out of China where inflation is running at an 8% annualized rate, the highest in 12 years.
In the Gulf State countries, countries like Saudi Arabia, Kuwait, United Arab Emirates, Bahrain, and Dubai, inflation rates are running between 7% to as high as 12% with prices soaring at the consumer level.
No wonder the People’s Republic of China recently moved to tighten reserve requirements once again, raising the ratio of reserves that banks must set aside by 1 percentage point last week
last week Asian markets collapsed on much tighter credit. In the history of markets, there is always a point where monetary tightening becomes aggressive and it impinges on the healthy outlook for equity markets.
This ‘tipping point’ has now been reached in Asia, and last night markets seemed to downgrade growth prospects in Asia by taking down the benchmark Hangseng Index by 4.21%, and the Shanghai Composite down by 7.7%.
Yuan was made floating in July05, since then an appreciating Yuan offsetting some of the Crude Oil advance, the advance in Crude Oil is still quite pronounced
manufacturing economies live and die with Oil prices. Years ago in the 1970’s and early 1980’s, before the US exported much of its manufacturing base to Asia, when Oil prices surged, the economy foundered.

Oil prices are rising at better than an 80% year over year rate of change. Spikes of this magnitude in the past were big trouble for the US economy and are very likely to be problematic for the heavily Oil dependent Chinese economy. At the very least, a serious slow down should be in the making in the wake of this Oil spike as the ‘pass through’ inflationary pressures this type of spike tumbles 3rd world oil dependent economies
Above: year over year Rate of Change of Oil prices in Chinese Yuan terms.
In South Korea, the annualized Rate of Change for Oil prices as expressed in South Korea Won terms is now over 100% per year; that’s a lot of upside price pressure in the pipeline and the kind of thing which will breed cost-push inflation.
Hangseng Index can be considered as a proxy for emerging Asia,
Hangseng traced out a five wave decline from the high at 31,600 last October into the low seen at 21,084 in March of this year. This was then followed by a 50% retarcement into the high seen on May 6 at 26,262. there is a possibility that a much larger ‘C Wave’ decline is now getting underway, a decline which would likely equal or exceed the previous A Wave decline.