- Macro Economic Perspectives
- Interest Rates & Fixed Income Opportunities
- Liability Driven Investing
Macro Economic Perspectives
- China Throttles Up Growth, Risks
- Five Over Five
Major Global Themes Expected to Shape Markets Through 2020
- Thoughts on the ECB's QE
- Enrich- or Beggar-Thy Neighbor?
- Europe: Into the Void
- Central Bank FX Reserve Adequacy
FX Reserve Adequacy in the Emerging Markets
- China's Challenging Road Ahead
- China's Stop-and-Go Goes On
- Prudential Fixed Income's Sovereign Ratings Framework
- Central Bank FX Reserve Adequacy
A Historical Perspective
Gerwin Bell PhD, Lead Economist Asia Global Macroeconomic Research, Prudential Fixed Income, June 2015
A contemporaneous and large-scale de-facto tightening of China's monetary and fiscal policies caused the sudden turn of economic performance since the end of 2014. Belatedly, this triggered a wave of new policy easing measures in mid-May 2015 that has profound implications for future macroeconomic policy and reform. The balance of risk has now turned from an excessive slowdown to a repeat of the 2009-2010 stimulus bonanza-including the volatility that could emerge when the easing is unwound.
Arvind Rajan, Managing Director and Head of Global and Macro, Prudential Fixed Income, June 2015
Most financial forecasts tend to have short term horizons—and with good reason—the idea of a five-year outlook covering major themes likely to drive global markets can appear ambitious. Yet the fact remains that many institutional investors have longer time horizons. This paper covers five major global macroeconomic themes with clear views on how they are likely to drive markets for the next half decade.
Jürgen Odenius, PhD, Managing Director, Chief Economist, Head of Global Macroeconomic Research, Prudential Fixed Income, January 2015
The European Central Bank's (ECB) announcement appears largely designed to further weaken the euro. The ECB aims to add €1.1 trillion in assets, and possibly more, thereby returning the balance sheet to its 2012 high. The program could well be extended, should inflation fail to rise towards the de facto 2% target.
Jürgen Odenius, Chief Economist, Head of Global Macroeconomic Research and Andy Chen, CFA, CAIA, Analyst, Global Macroeconomic Research, Prudential Fixed Income, December 2014
Policy makers typically suggest QE is primarily aimed at strengthening domestic demand. The evidence, however, is mixed and instead the impact of QE on exchange rates seems by far more pronounced.
Robert Tipp, CFA, Managing Director, Chief Investment Strategiest,Head of Global Funds, Prudential Fixed Income, October 2014
Over the last 12 months, core European government bond yields tumbled from over 2% to below 1%, while European peripheral yields declined by even more. This brief paper provides some perspective on these watershed shifts in valuation, their probable causes, as well as what's likely to come next.
Jürgen Odenius, Chief Economist, Head of Global Macroeconomic Research and Arvind Rajan, Managing Director and International Chief Investment Officer, Prudential Fixed Income, October 2014
Building on an earlier paper, Odenius and Rajan apply key metrics to assess the adequacy of FX reserves across a large and investable universe of emerging markets and devise stress tests to simulate three distinct shocks and their impact on FX reserves.
Gerwin Bell, PhD, Lead Economist Asia Global Macroeconomic Research, Prudential Fixed Income, September 2014
In this thought paper, the authors explain that China's economic transition represents a monumental challenge as it has become much more difficult for the world's largest exporter to simultaneously maintain rapid growth and financial stability. Based on ongoing analysis, however, they believe that China has the tools to avoid a hard landing and that broadly bearish positioning is not warranted at this time. Still, under a more consumer and domestically oriented economy, the authors indicate it is unlikely that China will match its prior growth rates. They subsequently provide scenarios for China's growth, followed by their views of the financial and real estate sectors, before concluding with the consequent investment implications.
Gerwin Bell, PhD, Lead Economist Asia, Global Macroeconomic Research, July 2014
Over the last few years, observers of Chinese macroeconomic policy makers could draw a parallel to an impatient motorist. Just as the latter speeds up when the first opportunity arises—only to quickly stop at the next red light—so too have Chinese macroeconomic policies oscillated between easing and tightening conditions. The red lights have taken the shape of inflationary pressures, overheated real estate markets, rapid credit growth, and balance sheet concerns. The latest turn in macroeconomic policies, which mostly represent an accumulation of numerous "mini-stimuli" initiatives and buoyant liquidity conditions, again fits the pattern as this easing follows the tightening moves earlier in the year.
Jürgen Odenius, Chief Economist, Head of Global Macroeconomic Research and Gerwin Bell, PhD, Lead Economist Asia, Global Macroeconomic Research, Prudential Fixed Income, February 2014
Our sovereign ratings framework rests on two major pillars—a quantitative assessment of macro fundamentals combined with a qualitative assessment of the institutional framework and policy making. In some instances, our ratings differ from rating agencies. These out-of-consensus views have proven to be meaningful drivers of alpha generation.
Jürgen Odenius, Chief Economist, Head of Global Macroeconomic Research and Arvind Rajan, Managing Director and International Chief Investment Officer, Prudential Fixed Income, September 2013
In this paper, the first in a series of three, we review the evolution of key concepts assessing the adequacy of FX reserves. We find that, despite nearly a decade-long history of economic thought, there is yet no comprehensive measure of FX reserve adequacy. Instead, there are loosely-based but widely accepted guidelines that tend to underpin FX reserve management practices.