BNP Paribas strategist Mirza Baig anticipates strife for leveraged commodity providers this year. Speaking at a media briefing in Singapore he also talked about the effects of the ongoing currency fluctuation in China.
With demand very weak and no immediate signs of an imminent pick up, commodity prices are at levels where production shutdowns and corporate debt defaults are likely.
Looking at the bigger picture however Mirza Baig (Pictured below) believes these events are necessary for demand-supply to rebalance and prices to then stabilize.
Enough Ammunition
Speaking about Asia, on Singapore, which has one eye on the Chinese currency fluctuation and the other on US dollar strength, and with weaker domestic loan growth, Baig foresaw the Monetary Authority of Singapore (MAS) calibrating the currency basket again, sooner rather than later.
When asked about the Hong Kong dollar peg coming under attack from speculators who sensed potential weakness he was confident that the Hong Kong Montary Authority (HKMA) would have enough ammunition and tools to fend off any hits. He noted that Hong Kong deposit growth is hitting double digits also assisting the HKMA.
Asian interest rates
The outlook for the domestic interest rates across Asia obviously differs between countries, while most central banks would prefer to trim their rates further their manoeuvring space depends largely on developments outside of their control.
On the Japanese Yen Baig noted that the currency could be forced to 115 against the US dollar but expected Japanese central bank action if such a scenario starts to unfold.
