Asian Currencies Fallen!

These days, most of headlines discussing about financial market distress in the US is ushering in a new reality to the Asian markets. True, Asia’s banking systems are by no means facing nearly as severe a situation as those of the US or Europe. But even so, the impact of events in the US is likely to have important implications on Asia’s foreign exchange market and monetary policy.

Somehow, in Asia’s currency markets, developments in the US are likely to affect forex rates in two ways. On one hand, the turmoil in the US financial markets should spell a weaker US dollar; this would imply Asian currencies should be under pressure to appreciate. On the other hand, weakness in the US economy in the coming quarters, owing to tighter credit market conditions, will take its toll. The latter should lead to a further deceleration of exports from Asia to the US and the rest of the world. This suggests depreciation pressure will push down Asian currencies. A weaker US financial industry is also likely to lead to a selloff of Asian equities and assets in the US and elsewhere. 

Again, the turmoil in the US financial market and sharp decline in oil prices are likely to change the monetary policy landscape in the rest of Asia. Before recent events, I had thought the dominant monetary policy stance in Asia would be tightening through end-2008. However, expected weaker exports and an increasing negative wealth effect have stepped to the fore — these certainly put pressure on economic growth, although the banking system remains sound across Asia. Elsewhere, inflationary pressure is seen losing momentum as the two biggest contributors to the CPI inflation rate — oil prices and food prices — are likely to start to moderate within the next few months.

With these developments, most Asian monetary authorities should now be changing their stance from tightening to neutral. This policy change should be followed by monetary easing around end-2008, when the market is likely to clearly see that exports are decelerating.

Next question: Rough road ahead?

Why Do Homeless People Keep Living?

I've been thinking lately about why homeless people continue to live.  To be clear, I'm not talking about someone who is perhaps down on their luck, maybe even for a few years.  In that case, I guess there is some clear hope that he or she can get back to it. I'm wondering about the people who go say 5+ years and seem to either go deeper into the hole or stay where they are with no upturn in site.  I've seen people like this around my neighborhood, there never seems to be hope.  Somehow, they wake up every morning with nothing and often nobody but they keep going.

I wonder what keeps them going.  My presumption is that they are not particularly happy and unlikely to be happy in the near future.  So, it's a life of sadness that perpetuates itself. There's got to be something inside that keeps them going because it appears that there is no great reward outside for them.  Who knows maybe they really are happy? (although I doubt it)

An interesting possibility may be that it doesn't matter whether they are happy or sad, that life is not necessarily meant to be a vectored journey towards happiness.  That's certainly a challenging point of view and would make the issue make some level of sense.

One thing's for sure, a meaningful % of us that have something want to try to get those who don't out of it.  Then again, we don't really care do we?  If we really did, I feel like it would be solved on a larger scale than it is now.

Next question: What is it?  What keeps them going?

Price War in Mobile Industry

What is “price management”? In mobile communications, headline ARPU and MoU can be misleading because in many markets there is high double-counting of users.RPM (revenue per minute) is often more useful than ARPU; and in practice we see changes in RPM as the best guide to how efficiently operators manage voice prices.

Where MoU (strictly speaking, MoU adjusted to avoid the effects of double-counting) rises by more than RPM falls, there is positive elasticity of demand and it makes sense to cut prices. Where MoU rises by less than RPM falls, there is negative elasticity and cutting prices does not make sense unless it also boosts subscriber growth.

Sample for Indonesian operator, in the wake of a price offensive launched by no.2 operator Excelcomindo, Indonesia’s mobile market is showing the highest elasticity in Asia: steep declines (50% or more) in RPM have driven increases in adjusted MoU of 200-300% or even higher. I think this strong growth in usage can be sustained. Excelcomindo (owned by Telekom Malaysia International) should be the primary beneficiary, but leading operator Telkomsel (owned by PT Telkom and SingTel) also stands to benefit over time.

Next question: when we will know how to reach for the right price?