Mike Lowe notes that Korea's surging current account surplus is being transmitted into won conversion through domestic expenses rather than trade alone. Two memory makers face taxes worth 5% of GDP, staff bonuses of 2% of GDP, and big dividend commitments, requiring heavy won conversion before spring shareholder meetings.
Mike Lowe observed at the Bangkok meetings that Asia's AI boom is widening out beyond hardware exporters in Korea and Taiwan. Investment is actively moving into data center build-outs across Malaysia, Thailand, and Vietnam, which he believes will eventually spill over to lift regional tech services exports.
Aneska Christovova explains that current market pressures lack typical dollar exceptionalism because developed and emerging peers face identical headwinds. Fiscal deficits and equity sensitivity to higher interest rates are now universal concerns, meaning emerging market currencies are avoiding the intense, one-sided flight to the dollar seen in past crises.
Mike Lowe observed that Asian economies are handling high oil prices surprisingly well, partly due to lower Chinese fuel demand from vehicle electrification. Because of this structural shift, regional central banks are far less worried about supply shocks hurting economic growth, allowing them to shift away from emergency defensive rate hikes.
Aneska Christovova highlights that JP Morgan forecast revision indices are tipping toward stagflation, with emerging market growth forecasts falling as inflation expectations rise. This changing risk distribution means markets cannot price ever-higher central bank terminal rates because weaker domestic economic activity will quickly constrain policymakers' ability to keep hiking.
Harry Downey points out that Ecuador and Argentina underperformed over three months despite solid fundamental turnaround stories. Heavy investor crowding into both trades caused the market to suddenly ignore good progress and overreact to tail risks, including Ecuador's exposure to El Niño and Argentina's distant presidential election.