China: An Exit Strategy for the Renminbi
The Renminbi exchange rate has entered a de facto new regime - featuring a quasi-hard peg to the USD - since July 2008, and we think this will remain unchanged through 2009 and most probably over the next 12 months. There are two likely exit strategies: 1) resumption of gradual appreciation against USD under a de facto crawling peg regime, and 2) a genuine and transparent peg to a currency basket. The latter is more likely to be adopted than the former, in our view.Hong Kong: Q&A on Monetary ConditionsThe stream of capital inflows into the Hong Kong dollar and the associated interbank liquidity has refueled discussions about the Hong Kong currency board and monetary system. In this report, we compile the commonly asked questions, and our answers to them, related to Hong Kong's currency board and monetary system, the latest developments with respect to liquidity conditions, and longer term fundamental considerations for monetary management in Hong Kong.India: Rising Significant of Rural DemandWhile we expect some of the cyclical factors to soften over the next 12 months, we are optimistic that the government will begin to address a few of the long- pending structural issues necessary to provide a sustainable improvement in farm incomes. Moreover, we believe that the non-farm rural income will maintain its healthy growth, implying that the rural economy will continue to be an important market destination for corporate India. Indonesia: Adding Another "I" to the B-R-I-C Story?Indonesia will still undergo cyclical pain in 2009. However, we expect the positive trigger in the form of strengthened political mandate in the recent general elections to help accelerate policy reforms, which together with the ongoing structural decline in cost of capital, is likely to help unleash Indonesia's growth potential of 6-7% by 2011 onwards.