Saturday 19 April 2014

Why liquidity stays high?

In this week’s update on the State of the Nation, The Edge explores the reason(s) behind the continued liquidity in the emerging markets despite the tapering of Quantitative Easing (QE) in the US which has continued as scheduled.

After a shaky start to the year, equities in emerging markets are surprisingly, back in the black – at least for now, after the strong gains in the past two months.

What has changed since then and are investors now being overly optimistic?

Why liquidity stays high despite expectations of foreign sell-out in emerging markets following the QE tapering?

The answer lies in expectations that there will be sources of liquidity from other parts of the world, and that the pumping in of money from notably Japan and the EU will continue.

The deflationary environment in the EU is prompting investors to expect further printing of money to stimulate growth.

Read the full article in The Edge this week.  

We will provide further analysis on the view that this global deflation will be addressed by monetary expansion.  More to the point, what this means for the Malaysian stock market, bond market and the Ringgit in the weeks ahead.  Stay tuned.

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