I’ve gone into the equities market some weeks before Chinese New Year since it was quite bullish. Reading the Edge and Star Business, I was pretty confident of the market. It was pleasant surprise, waking up on the 4th day of Chinese New Year to discover that the KLCI was the highest since the Asian crash of 1997.
Think of the even greater surprise a week later when a massive global sell-off happened less than a week after the papers have hailed the record breaking feat in the local bourse. The cause of the massive sell off was attributed to a Chinese capital control rumor. The rumor caused panic sell-off in the Shanghai stock exchange and every market, including the Dow, suffered.
But it has now been a week since then and the sell-off is still high. Looking at the regional market, the bearish sentiment seems prevalent. Is the sell-off really caused by what analysts now call the “Shanghai Sneeze”? Or is it caused by the Yen carry trade?
According to Wikipedia:-
In the last couple of years, the yen has grown weaker and weaker against not only the dollar but against nearly all other important world currencies due to a de facto zero interest rate policy which has encouraged massive yen carry trades, where speculators borrow in yen and buy bonds and other assets in currencies that charge significant interest. This can be very profitable, but is a short position on the yen, which in the absence of other factors drives the yen’s value down
Whatever it is, I wished that I had bought that new flat panel LCD TV that I was eyeing at 🙂
