1. The monetary musketeers and Japan’s d’Artagnan
1.1. yellen
1.1.1. Equity markets
1.1.1.1. reacted positively to this announcement, suggesting the decision was well anticipated
1.1.2. recovery of the US economy
1.1.2.1. if it remains on track, stronger uncertainties will weigh on emerging markets
1.1.2.1.1. could suffer from renewed capital outflows.
1.2. Carney & Draghi
1.2.1. Funding for Lending Scheme
1.2.1.1. refocusment
1.2.1.1.1. improved substantially
1.2.2. ECB
1.2.2.1. cut its key interest rate
1.2.2.2. conventional measures in the first instance
1.3. Abenomics
1.3.1. Monetary policy
1.3.1.1. Bank of Japan
1.3.1.1.1. continue its quantitative easing
1.3.2. Expansionary fiscal policy
1.3.2.1. government additional fiscal stimulus
1.3.3. structural reform
1.3.3.1. government improve labor market flexibility
2. Disinflation in the advanced economies
2.1. supply and demand
2.1.1. weak demand and supply
2.1.1.1. high unemployment rates, contracting (or decelerating) wages ...etc
2.2. Inflation
2.2.1. big drop in the inflation rate in the US weakened
2.2.1.1. big drop also in the euro zone
2.3. commodities
2.3.1. Risk
2.3.1.1. upside risks remain on the back of structural factors
2.3.1.2. Supply side risks mainly from instability in the Middle East and North Africa
2.4. EMU
2.4.1. unemployment rates
2.4.1.1. Rising unemployment rates at record levels in southern European economies
2.4.1.1.1. Leading to sharp declines in real wages
2.4.2. Deflation
2.4.2.1. Greece and Cyprus have experienced deflation
2.4.3. corporate profitability
2.4.3.1. downside pressures on prices could endanger corporate profitability
3. Periphery countries
3.1. Emerging Europe
3.1.1. National currencies
3.1.1.1. Should downward pressure on national currencies increase in H1 2014
3.1.2. most countries avoided that sell-off
3.1.2.1. they had not attracted substantial capital inflows in the previous years
3.1.3. Turkey
3.1.3.1. where large short-term capital inflows have financed high current account deficits in recent years
3.1.3.2. Central Bank of Turkey
3.1.3.2.1. stem depreciation pressures mainly through FX interventions
3.2. Heterogeneity
3.2.1. current account deficits
3.2.1.1. Turkey, Serbia and Ukraine
3.2.1.1.1. external shortfalls of GDP.
3.2.1.2. high annual external debt payments falling
3.2.1.3. foreign exchange reserves
3.2.1.3.1. Ukraine, Turkey, Poland, Bulgaria, Hungary and Romania
3.2.1.3.2. Argentina and Venezuela
3.2.1.4. Peru and Uruguay
3.2.1.4.1. risen the GDP
3.3. Export markets
3.3.1. global economic environment
3.3.1.1. growth performance
3.3.1.1.1. United States and the euro zone
3.3.2. commodity prices
3.3.2.1. brighter outlook for the US will support most Latin American countries
3.3.3. Balkans
3.3.3.1. send around 60% of its exports to the euro zone
3.3.4. Turkey
3.3.4.1. exports going to the eurozone has fallen
3.3.5. Russia & Ukraine
3.3.5.1. benefit less from the euro zone recovery
4. Old and new political risk in 2014
4.1. MENA Region
4.1.1. ongoing risks, including fragile political transitions
4.1.1.1. North Africa (Egypt, Libya & Tunisia) & Yemen
4.1.1.2. Syria
4.1.1.2.1. Civil war
4.1.1.3. Iraq
4.1.1.3.1. high security alerts
4.1.1.4. Bahrain
4.1.1.4.1. unresolved sectarian issues
4.1.1.5. Israel & the authorities in the Palestinian territories
4.1.1.5.1. continuing stand-off
4.1.1.6. Arab Spring
4.1.1.6.1. Tensions between Shia & Sunni Muslem communities
4.2. Busy political calendar
4.2.1. significant elections
4.2.1.1. BRICS (Brazil, Russia, India , China & South Africa)
4.2.1.2. large emerging economies
4.2.1.2.1. Indonesia, Turkey ,Ukraine & United States
4.2.1.3. United Kingdom
4.2.1.3.1. Referendum in Scotland
4.2.1.4. India
4.2.1.4.1. electoral track record
4.3. Institutions and societal risk
4.3.1. stable political base
4.3.1.1. good bedrock for cultivating external investor & trading interests
4.3.2. lack of political enfranchisement
4.3.2.1. social pressures were building in MENA
4.3.3. Modern communication systems
4.3.4. Political risk
4.3.4.1. ongoing conflicts & tensions
5. A new form of protectionism
5.1. Regional Blocs
5.1.1. Asian Economic Community (AEC)
5.1.1.1. creating a single market and production base
5.1.1.1.1. competitive & world-integrated region
5.1.2. Pacific Alliance
5.1.2.1. advance free trade with a “clear orientation towards Asia
5.1.3. GCC
5.1.3.1. difficulties
5.1.3.1.1. forming a regional bloc
5.1.4. customs union
5.1.4.1. Bahrain signed a free trade agreement with the US & the UAE
5.1.4.2. Oman
5.1.4.2.1. rejected membership of a monetary union
5.2. Bridging Continents
5.2.1. transatlantic agreement
5.2.1.1. reinvigorating bilateral trade between the US & the EU
5.2.1.2. enable them to make up some global market share lost to emerging countries
5.2.2. pacific agreement
5.2.2.1. negotiation between 12 countries, including the US, Chile, Japan and Malaysia
5.2.2.1.1. 40% of global GDP
5.2.2.1.2. 26% of global trade
5.2.2.2. eliminate tariffs on goods & services, reduce non-tariff barriers & harmonize regulations.
5.3. Supply Chain Barriers
5.3.1. World Bank
5.3.1.1. reducing supply chain
5.3.1.1.1. increase global GDP
5.3.2. obstacles
5.3.2.1. market access
5.3.2.2. border administration
5.3.2.3. telecommunications & transportation infrastructure
5.3.2.4. business environment
5.3.3. Lowering Supply chain barriers
5.3.3.1. gains would be more fairly distributed among countries
5.3.4. Enabling Trade Index
5.3.4.1. World bank
5.3.4.1.1. Best countries
6. Emerging markets
6.1. Emerging Economies
6.1.1. Risk
6.1.1.1. cyclical risk
6.1.1.1.1. short-term weaknesses
6.1.1.2. liquidity risk
6.1.1.2.1. economy’s capacity
6.1.1.2.2. structural weaknesses
6.2. Types of Policies
6.2.1. economic downturn.
6.2.2. monetary policy
6.2.2.1. financial stability defense
6.2.3. large emerging countries
6.2.3.1. keep their currencies at safe levels,
6.2.3.2. interest rates
6.2.3.2.1. Indonesia & Brazil
6.2.4. Fiscal policy
6.2.4.1. GDP growth
6.2.4.1.1. ideal tool for policy makers during challenging periods
6.2.5. Financial Crisis of 2009
6.2.5.1. large economies increased public expenditure
6.2.6. pro-cyclical policies
6.2.6.1. previous track records of debt default and perceptions of corruption
6.3. Exchange risk for corporate
6.3.1. Macro risk
6.3.1.1. stronger financial fundamentals & responsive policies
6.3.1.2. correspondingly lower
6.3.2. currency fluctuation
6.3.2.1. highly sensitive
6.3.2.1.1. External trades
7. China’s transformation
7.1. Stable Growth
7.1.1. more inclusive and sustainable growth, less reliant on exports
7.1.2. support “appropriate growth” and maintain “proactive fiscal” and prudent monetary “policies”
7.1.3. GDP growth will probably slow
7.1.4. consumption based, supported by rising incomes and employment
7.2. Credit & Financing
7.2.1. markets are expected to get “a decisive” role in resource allocation
7.2.2. financial sector will be opened to include acceleration in interest rate liberalization and the convertibility of the RMB capital account
7.2.3. Social financing grew & major part of the non-standard financing, increased
7.3. Regional Trade
7.3.1. Main trade partners
7.3.1.1. south Asian countries
7.3.2. Imports from China will continue to fuel growth in the region in 2014
8. Re-industrialization of United States
8.1. Limited impact of the Fed tapering
8.1.1. Fed announced tapering of its QE program, with expectations that it will terminate by the end of 2014
8.1.1.1. QE tapers, long term rates will likely rise, making lending more profitable which will expand credit more rapidly
8.1.2. Fed will keep short term rates at 0% through 2015 or later
8.1.2.1. monetary policy remains very loose and is expected to contribute to growth in most sectors
8.2. Managing short-term political turmoil
8.2.1. Fiscal policy uncertainty has been reduced
8.2.2. Congress approved the first budget in four years
8.3. Energy Policies
8.3.1. Energy revolution
8.3.1.1. new reserves of shale gas and crude oil continue to flood the US market with cheap energy.
8.3.2. WTI crude
8.3.2.1. sells at a 13% discount to the global Brent price
8.3.3. Natural Gas
8.3.3.1. recently been bid up due to cold weather to $4/mmbtu
8.3.4. Cheap energy
8.3.4.1. boosting manufacturing
8.3.4.1.1. natural gas powered autos
9. Euro Zone Economic Situation
9.1. Structural Reforms
9.1.1. Greece, Portugal & Spain they did a 10% reduction on current account defict
9.1.2. Italy
9.1.2.1. Implemented its first measures only in mid 2012.
9.1.3. European Leaders
9.1.3.1. Germany
9.1.3.1.1. high tech exports, started to implement a strategy towards smart industry
9.1.3.2. France
9.1.3.2.1. labour market rigidity and the tax burden remain very high
9.2. Financing
9.2.1. Economic Crisis
9.2.1.1. has been the credit crunch in southern European countries
9.2.2. credit financing
9.2.2.1. contracting in Germany & France
9.2.2.1.1. weak demand and a reluctance of firms to invest
9.2.3. corporate funding
9.2.3.1. 2/3 of it in the eurozone comes from banks
9.2.3.2. common strategy
9.2.3.2.1. restore credit channels
9.2.4. R&D
9.2.4.1. increase in R&D spending
9.2.4.2. common energy policy
9.2.4.2.1. lower EUR
10. Global Re-balancing
10.1. Growing in Sync
10.1.1. advanced economies
10.1.1.1. growth paths between regions have become more synchronized
10.1.2. financial crisis
10.1.2.1. supported global GDP growth by emerging economies supported global GDP growth
10.1.3. AE & EM
10.1.3.1. together on rise
10.1.3.2. contributing to growth
10.1.4. 55% of world GDP growth to come from the emerging markets in 2014-15
10.1.5. GCC countries and Asian dragons
10.1.5.1. were able to match the living standards of advanced economies
10.1.6. Slovenia and Slovakia
10.1.6.1. caught up, particularly some in Emerging Europe
10.2. Current Account
10.2.1. improvement of financial fundamentals
10.2.1.1. avoid new financial pressures
10.2.2. Fiscal consolidation
10.2.2.1. euro zone
10.2.2.1.1. a start for the countries most at risk in that region
10.3. Political Economy
10.3.1. export boosting
10.3.1.1. innovation to reinforce growth potential
10.3.1.1.1. avoiding
10.3.2. business environment
10.3.2.1. long way to go as many of the large emerging economies
10.3.2.1.1. difficult markets for investors
10.3.3. political stability
10.3.3.1. key factors in reassuring investors & promoting corporate activity
10.3.4. structural adjustment
10.3.4.1. take time before benefits materialize, typically from 5 to 10 years