China’s Reserve Growth: Still Large, and Rather Volatile

China’s foreign exchange reserves reached over $1.9 trillion at the end of September, taking its stocks to almost twice that of Japan, the second largest holder of reserves and almost four times that of Russia ($540 billion)

This implies an increase of about $100 billion over the quarter or less than the reserve accumulation of the last two quarters.  More significantly, it is about the same as the combination of the trade surplus and FDI, indicating that hot money inflows may have been reduced or even reversed. However, on a monthly basis, the flows continue to be quite volatile, given some indication of the pressures Chinese macro policy makers are facing – and possibly suggesting that China could experience more outflows in the future.

Russia’s bailout package just keeps getting bigger

Just as Russia seems poised to loan Iceland $5+ billion ($4b Euros) to stem a run on Iceland, President Medvedev announced $37 billion in new long-term loans into state banks. By our best guess (and assuming that the funds are not double counted) Russia’s bailout seems to be in the neighborhood of $180 billion. (Bloomberg says $200 billion). These are incredible sums of money – and a reflection of the enormous shift in funds from developed to developing countries. Yet could it be not enough?

All in all, Russia has pledged funds exceeding 10% of its GDP. For those of you, like us who might have been getting confused by the dizzying numbers, we present is a list of Russia’s capital injections. Where possible we’ve tried to identify where the money is coming. But this is an incomplete list – comments and corrections welcome.

Fallout of the Global Financial Turmoil in the Middle East

In this note, we survey how Middle Eastern markets fared in the recent turmoil in global financial markets triggered by the response to the bankruptcy of Lehman Brothers, the demise of the other independent broker dealers and the U.S. bailout of AIG and of the broader financial system. The events of last week, illustrate clearly that the Middle East is not, if it ever was, immune from global trends. However, it is the real economy linkages and various home grown liquidity vulnerabilities that provide the most pause going forward. However, this isn’t a time to be drastic, with oil still over $100 a barrel, there are a lot of oil revenues going to the GCC and the broader region but the Middle East may be as prone to capital misallocation as anywhere.

Sidelined sovereign wealth…

In the midst of the financial meltdown, many people have been wondering where the sovereign wealth funds are or rather what their long-term role might be in providing capital. The financial sector has been a major focus for sovereign investors in part because such investments dovetailed with domestic financial development goals – and investing in […]

Rise of the Chinese consumer?

There are signs that Chinese private consumption is on the rise – retail sales have been accelerated in real terms despite 8% inflation in the first half. Stripping out CPI, retail sales averaged about 14% in the first half and rose 15.9% in July. This plus the continued strength of exports are leading some people […]

Is China Suffering an Olympic Shock?

China’s economy is slowing from the heights achieved last year, having decelerated for the past four quarters – and consensus expects a below 10% reading for the second half. Is this the Olympics slump suffered by countries like Greece and Spain rearing its ugly head? Many Olympic host countries suffer a period of slower growth […]

Sovereign Wealth Fund Watch: US Taxation and Banking Oversight

The Joint Congressional Committee on Taxation just released a large report on tax implications of sovereign wealth funds (pdf). One outcome of the crush of attention on sovereign wealth funds in the last year or so has been an outpouring of information both on funds themselves and on the legislation that might be relevant. More […]

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