Let?s take a look at two global economic updates or interesting key developments that happened last week that investors should take note of. First up, we take a look at the dovish comments given by Janet Yellen, the nominee to succeed Ben Bernanke as Fed Chairperson. Next, we?ll zoom in to Malaysia where it is showing signs of recovery and beating expectations with strong exports and domestic demand.
QE set to continue under backing of Yellen
On 14th Nov, Janet Yellen, the current Fed vice chairman, announced that she was…
Let’s take a look at two global economic updates or interesting key developments that happened last week that investors should take note of. First up, we take a look at the dovish comments given by Janet Yellen, the nominee to succeed Ben Bernanke as Fed Chairperson. Next, we’ll zoom in to Malaysia where it is showing signs of recovery and beating expectations with strong exports and domestic demand.
QE set to continue under backing of Yellen
On 14th Nov, Janet Yellen, the current Fed vice chairman, announced that she was committed to promoting a strong economic recovery. She also indicated she’ll press on with the Federal Reserve’s unprecedented monetary stimulus until she sees a healthy recovery, downplaying risks the policy would be inflating asset bubbles.
Taking cue from the Yellen’s dovish comments, the Asian stock markets were up. The Singapore Strait Times Index (SGX: ^STI) was up 0.46% for the week while Nikkei 225 skyrocketed 7.66% in comparison. Meanwhile, the Dow Jones Industrial Average also rose to a record and the Nasdaq Composite Index added 0.2% to the highest since September 2000.
During her confirmation hearing to be the next Fed Chairman, Yellen maintained her stance that the benefits of the bond-buying program would outweigh the cost, and the best thing the Fed could do to combat income inequality is help the job market recover. She continued to dispel concerns from senators that the central bank’s policy is pumping up the values of equities and housing to such an extent that it jeopardizes market stability.
“The possibility of there being a bubble isn’t going to keep her from doing more if she thinks that’s appropriate,” said Brian Jacobsen, who helps oversee $236 billion as chief portfolio strategist at Wells Fargo Advantage Funds. “She sees no problem in doing more asset purchases” or even expanding them, he said.
Lastly, Yellen also reassured senators that the era of low interest rates and quantitative easing cannot be sustained indefinitely. “This program cannot continue forever,” Yellen said. The Federal Open Market Committee “is focused on a variety of risks and recognizes that the longer this program continues, the more we will need to worry about those risks,” she said.
Malaysia gathers steam ahead
Malaysia’s economy posted a year-on-year growth of 5% in the third quarter of 2013; modestly beating expectations of 4.8% due to strong exports and domestic demand, official data released on Friday showed.
Malaysia has seen continued strength in its economy growth rate, where it grew at 4.1% in the first quarter and 4.3% in the second quarter of the year. The nation’s economy has been previously struggling with heavy capital outflows, low external demand and a sharp fall in its currency amid a dwindling trade surplus.
“For the Malaysian economy, the gradual recovery in the external sector will support growth,” central bank Governor Zeti Akhtar Aziz said in a statement, media reports said. “Domestic demand from the private sector will remain supportive of economic activity amid the continued consolidation of the public sector. The economy is therefore expected to remain on its steady growth trajectory.”
The central bank retained its full-year GDP forecast range of 4.5% to 5% for 2013. As Malaysia’s economy still face headwinds due to the persistent slow growth in its key export markets — China and Europe, the Malaysian government has been pressurized to push for structural reforms. One of the important changes is the cutting of fuel subsidies and a new flat rate consumption tax which sets to start in April 2015.
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