Emerging Markets: Asian Stock Markets Plunge On Global Credit Concerns, Chinese Yuan

[B]Recap Of The Week?s Top Stories?[/B]
[B]Chinese Yuan Pares Back Against US Dollar, Markets Pummeled In Session[/B]
The Chinese yuan pulled back significantly against the US dollar, while making further ground against the Euro and British pound as markets in Asia were hammered following losses in major US markets the day before. In New York, the yuan traded as high as 7.5880 against the US dollar. Notably Singapore?s Straits Times Index declined by an impressive 3.35 percent, second to Taiwan?s markets which plummeted more than 3.5 percent on the day. Hong Kong wasn?t left out as the benchmark Hang Seng Index dropped by 2.87 percent, shedding a whopping 632 points in the overnight session. Surprisingly, losses were minimized in the Shanghai exchange as the index lost a mere 16.68 points to close down 0.34 percent. Market sentiment was supported by the earnings release of Citic Securities Co. which saw first half year profits jump more than five times as surging speculation in China had boosted trading fees for the company. Net income rose 4.2 billion yuan from a mere 775.8 million in the year ago period. The results have the company pitted to take over as Asia?s biggest brokerage, a title held by Nomura Holdings inc. (August 15th)

[B]Industrial Output In China Advances By 18 Percent[/B]
Output in the world?s fastest growing economy advanced at a healthy 18 percent pace for the month of July, coinciding with previous growth figures presented earlier in the quarter. However, the report, although optimistic, was less than consensus estimates of 19.4 percent and shows signs of slowing down. For the first time in three months, it seems that the recent repeal of export rebates may be cutting into the productivity of the overall sector. Manufacturers and major exporters now no longer have the luxury of what some deemed a governmental subsidy in boosting output. The findings are a welcomed release as government officials have made more than enough attempts at cooling the overheated economy. Now, it seems that newly implemented policies may be working their way through the economy, albeit at a slower pace than some would want.
[B]China Fixed Asset Investment Advances 26.6 Percent[/B]
Spending on factories and equipment rose by an impressive 26.6 percent so far this year as businesses continued to meet growing demand domestically and abroad. Fixed asset investment in the world?s fastest growing economy surged ahead to $747 billion, close to the 26.7 percent rate last year according to the statistics bureau. In detail, for the first seven months of the year, new investment projects were in the view of 132,099, adding 17,168 to last year?s figure. Overall good for the economy, the surge in investment has, however, built up money supply inflation. As a result, speculation continues to grow over the possibility of further rate increases by the People?s Bank of China as policy makers attempt to rein in inflationary pressures supported by mounting growth. For the record the attempt would be the fourth time this year that policy makers will have tightened monetary policy aside from other monetary policy tools at the central bank?s disposal.
[B]China Retail Sales Rises To Historic Pace[/B]
Growing at the fastest pace since 2004, China?s retail sales survey jumped 16.4 percent in the month of July. Spending in the economy grew at a 699.8 billion yuan pace compared to a year earlier, according to the National Bureau of Statistics, and lends to speculation of mounting inflationary pressures in the world?s fastest growing economy. Attributed to the rise in spending is the rapid growth in incomes, to the tune of 14 percent, coupled with stock market gains offering individuals with more disposable income. Subsequently, consumer confidence in the economy is expected to rise to the highest level in almost 4 years for the second half of the year with robust growth continuing to support spending on the consumer level.
[B]US Requests Ruling On Chinese Piracy
[/B]In an aggressive move, the Bush administration requested that the WTO rule on a current complaint against China over the topic of pirated movies, music, software and books. More specifically, the US Trade Representative?s office took formal steps in asking arbiters to deem current Chinese laws too laxed in safeguarding current copyrights of American products. Although rightfully placed, the request will likely fall to the wayside, buying officials more time as Chinese leaders will be able to block the formal request. Subsequently, this would force the US to make an additional request for the establishment of a panel in September. Typically, rulings after that will take up to a year or more to finalize.
-Richard Lee, Currency Strategist