Tue, 21st November 2017

Anirudh Sethi Report


Archives of “President” Tag

US corporate chieftains make pilgrimages to China

Facebook CEO Mark Zuckerberg and other leaders of influential American companies have traveled to China in recent weeks, likely to start off on the right foot with the new leadership slate selected for President Xi Jinping at the Communist Party’s recent twice-a-decade congress.

 Dressing up for Comrade Xi

A suit-clad Zuckerberg spoke at the Great Hall of the People on Oct. 30, wishing China smooth economic development. Quoting a speech Xi had made at the party congress, he highlighted the importance of staying true to one’s initial intentions.

Xi responded with a contented smile. Facebook is blocked in China. Xi nevertheless cited a Chinese proverb saying in effect that friendship endures even when a business deal is not sealed.

The event involving the advisory board of the Tsinghua University School of Economics and Management was also attended by Apple CEO Tim Cook, Microsoft CEO Satya Nadella, and Blackstone Group Chairman and CEO Stephen Schwarzman.

Despite Facebook’s absence from China, Zuckerberg stopped by and cheered Xi’s leadership because the country is too important a growth market to ignore.

Cook apparently made positive remarks about Xi as well. China is home to many production facilities for iPhones and other Apple products. And as a market, it supplies around a fifth of the company’s global sales.

Trump Wanted Japan’s “Samurai Warriors” To Shoot Down North Korean Missiles: Report

Ahead of Trump’s visit to Asia, there were understandable concerns that a diplomatic snafu was imminent. Those concerns were partially justified following a report from Japan Times, according to which Trump said Japan should have shot down the North Korean missiles that flew over the country before landing in the Pacific Ocean earlier this year. The Japanese publication cited sources who claim that Trump questioned Japan’s decision not to shoot down the missiles when he met or spoke by phone with leaders from Southeast Asian countries over recent months to discuss how to respond to the threats from North Korea.

After North Korea launched ballistic missile tests on both August 29 and September 15 which flew over Hokkaido and landed in the Pacific Ocean, Trump was reportedly confused: “The U.S. president said he could not understand why a country of samurai warriors did not shoot down the missiles“, the sources said.

As Japan Times adds, “the Self-Defense Forces did not try to intercept the missiles, with the government saying the SDF had monitored the rockets from launch and judged they would not land on Japanese territory”

 The altitude and speed of the missiles would have made it very difficult to destroy them in flight, while failure would have been embarrassing for Japan and encouraging to North Korea. Defense Ministry officials confirmed this view and said there were also legal issues to clear.

Juncker: ‘We want a deal’ on Brexit

Jean-Claude Juncker, the president of the European Commission, has insisted that Brussels wants to reach a “fair deal” with Britain, in a bid to dampen down the furore over media reports allegedly containing details of his dinner last week with Theresa May.

“The commission is not negotiating in a hostile mood,” Mr Juncker said. “Those who don’t want a deal – the no deals – they have no friends in the commission.”

Mr Juncker and his team have come under pressure after a German newspaper ran a story supposedly recounting details of his dinner on Monday last week with Mrs May. The report, which alleged that the prime minister begged for help from Brussels, prompted a Twitter spat between Juncker’s chief of staff and one of Ms May’s former top advisors.

The commission president expressed his confidence that an agreement can be reached with London: “we will have a fair deal,” he said.

China Xi Jinping: Economic downward risks and uncertainties have risen

Xi is General Secretary of the Communist Party of China, President of the People’s Republic of China, and Chairman of the Central Military Commission.

Speaking at the BRICS summit
  • Some countries have become inward looking
I think we all know the gentleman he is talking about, right?
  • Global economic downward risks are on the rise
  • Need to oppose protectionism and rebalance globalisation to make it more sustainable

Dunford: “Military Options” For North Korea Ready If Sanctions Fail

After President Donald Trump warned on Friday that the US military is “locked and loaded” and presumably prepared for an all-out nuclear showdown with North Korea, administration officials engaged in that most artful of Trump-era maneuvers: softening the president’s rhetoric without appearing to undercut him.

Now that financial markets are taking the threat of nuclear war between the US and North Korea seriously – or were until this morning – the administration is trying to walk a fine line between reassuring investors that nuclear war isn’t imminent, while stressing that all military options remain on the table. Echoing comments made by CIA Director Mike Pompeo on the Sunday talk shows, Joint Chiefs of Staff Chairman Joseph Dunford emphasized during a meeting with South Korea’s president that the US will only resort to military options once all “diplomatic and economic sanctions” have been exhausted, according to Reuters.

 “U.S. Joint Chiefs of Staff Chairman Joseph Dunford said on Monday U.S. military options being prepared against North Korea would be for when diplomatic and economic sanctions failed, South Korea’s president’s office said on Monday.

Dunford made the comments to South Korean President Moon Jae-in in a 50-minute meeting to discuss recent issues including North Korean provocation, office spokesman Park Su-hyun told a media briefing.”

Gen Dunford met President Moon during his tour of the region

Trump: “Thank Congress That US-Russia Relations Are At All-Time And Dangerous Lows”

Update: shortly after he took credit for the record stock market and business enthusiasm, Trump – accurately – blamed Congress for the current “very dangerous” relationship with Russia, when he tweeted that
“Our relationship with Russia is at an all-time & very dangerous low. You can thank Congress, the same people that can’t even give us HCare!”

On Wednesday Trump similarly lashed out at Congress when signing the legislation, arguing the bill limited his executive power and ability to negotiate with Moscow.

“By limiting the executive’s flexibility, this bill makes it harder for the United States to strike good deals for the American people, and will drive China, Russia, and North Korea much closer together,” Trump said in a sharply worded statement.  He also said the bill was “seriously flawed” and included “a number of clearly unconstitutional provisions.”


Trump’s escalating fight with Congress republicans comes at a troubling time for the president: just as his approval ratings plumb all time lows, and just over a month before the critical negotiations over the US debt ceiling are set to take place. Failure to reach agreement there would lead not only to government shutdown, but also a technical default.


It appears the new ‘narrative’ from The White House is simple – keep distracting from the failures of massive policy reforms, and focus on the stock market and soft-survey hype.

President Trump’s opening tweets this morning keep the story going….

US House passes Russia sanctions bill

The US House of Representatives has passed legislation to impose new sanctions on Russia, North Korea and Iran by an overwhelming majority, setting the legislation on a collision course with President Donald Trump.

The bill, HR 3364passed the House on Tuesday with 419 votes for and 3 votes against.

In particular it imposes new sanctions on Russia in response to alleged meddling in the 2016 US presidential election that saw Mr Trump victorious, citing a January 2017 assessment from the US intelligence community.

Mr Trump has spent recent days railing against his former close campaign adviser, attorney-general Jeff Sessions, who upset the president in March when he recused himself from the Federal Bureau of Investigation probe into connections between the Trump campaign and Russia.

Speaking at a press conference on Tuesday afternoon, Mr Trump stressed that he was very “disappointed” that Mr Sessions had recused himself from the investigation, which has engulfed the White House since the president was inaugurated in January.

If Mr Trump vetoes the bill it will require a two-thirds majority vote in the House to still become law – likely a minor obstacle in light of the near-universal bipartisan support shown on Tuesday.

Yellen: “I Don’t Believe We Will See Another Crisis In Our Lifetime”

If there was any confusion why the Fed intends to keep hiking rates, even in the face of negative economic data and disappearing inflation, it was put to rest over the past 2 days when not one, not two , not three, but four Fed speakers, including the three most important ones, made it clear that the Fed’s only intention at this point is to burst the asset bubble.

First there was SF Fed president John Williams who said that “there seems to be a priced-to-perfection attitude out there” and that the stock market rally “still seems to be running very much on fumes.” Speaking to Australian TV, Williams added that “we are seeing some reach for yield, and some, maybe, excess risk-taking in the financial system with very low rates. As we move interest rates back to more-normal, I think that that will, people will pull back on that,

Then it was Fed vice chairman Stan Fischer’s turn, who while somewhat more diplomatic, delivered the same message: “the increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites…. Measures of earnings strength, such as the return on assets, continue to approach pre-crisis levels at most banks, although with interest rates being so low, the return on assets might be expected to have declined relative to their pre-crisis levels–and that fact is also a cause for concern.”

 Fischer then also said that the corporate sector is “notably leveraged”, that it would be foolish to think that all risks have been eliminated, and called for “close monitoring” of rising risk appetites.

Emerging Markets: What Has Changed

  • Moon Jae-in was elected president of South Korea
  • Philippine President Duterte named Nestor Espenilla as central bank governor
  • Nigerian President Buhari traveled to London for a follow-up to the initial medical visit earlier this year
  • Market expectations for 2018 inflation in Brazil rose for the first time in more than a year
  • Peru’s central bank unexpectedly started the easing cycle with a 25 bp cut to 4.0%

In the EM equity space as measured by MSCI, Brazil (+5.5%), Hungary (+4.3%), and Colombia (+4.3%) have outperformed this week, while Thailand (-0.9%), Poland (-0.7%), and the Philippines (-0.6%) have underperformed.  To put this in better context, MSCI EM rose 2.5% this week while MSCI DM fell -0.2%.


In the EM local currency bond space, Poland (10-year yield -14 bp), Brazil (-12 bp), and Hungary (-10 bp) have outperformed this week, while Czech Republic (10-year yield +25 bp), Argentina (+21 bp), and Turkey (+17 bp) have underperformed.  To put this in better context, the 10-year UST yield fell 1 bp to 2.34%.
In the EM FX space, RUB (+1.5% vs. USD), BRL (+1.4% vs. USD), and MXN (+1.2% vs. USD) have outperformed this week, while TRY (-0.7% vs. USD), PEN (-0.5% vs. USD), and ARS (-0.3% vs. USD) have underperformed.
Moon Jae-in was elected president of South Korea.  We think the biggest potential change coming from the election is in North-South (and as a result, US-South Korea and China-South Korea) relations.  President-elect Moon has said he will resume the “sunshine policy” of engagement with Pyongyang after 9 years of the hardline conservative approach, and will review the controversial THAAD missile shield.