Author: Gordon Platt


Large volumes of positions in stocks, foreign exchange and commodity markets have been funded in “zero cost” Japanese yen. Now, with the yen rising and liquidity drying up, emerging stock markets are being particularly hard hit, according to a report by London-based Lombard Street Research.

“Among the first to suffer from the US hard landing we are forecasting are likely to be Asian exporters, most obviously China but other Tigers, too,” the report on global leading indicators says. The US economy may have already peaked at the start of the year, it says, with the slowdown led by US consumers.

China’s unexpected interestrate rise at the end of April shows its authorities are serious about tightening.

“Having failed to put an end to the local authorities’ investment craze and faced with a massive bill for much more expensive raw materials,  Beijing will have to step on the brakes harder this time around,” the report says.

Given the scale of financial speculation in commodity markets and the chance that the speculators will be the first to bail out, grossly overvalued metals prices and probably oil, too, likely will begin falling, say Lombard Street’s analysts.

“These two points together mean the game will soon be up for most of the emerging stock markets,” the report says.

Gordon Platt