Monday, June 10, 2013

20130610 Links: Malaysia, eurozone banks, Venezuela

1. Is Malaysia "overheating"? 
Even in countries such as Malaysia where growth has been fuelled by pro-business policy measures, easy lending conditions have also played an important role in supporting economic activities, in particular for private consumption and investment.
The point was underscored by IMF managing director Christine Lagarde, who, in a speech delivered during a meeting of the Economic Club of New York on April 10, cautioned that although it made sense for monetary policy in the emerging and developing countries to do the “heavy lifting” by remaining accommodative during the recovery period and in a low-inflation environment, there were unintended consequences. 
She points out that “low interest rates push people to take on more risk – some of which justified, some of which not”. 
Standard & Poors Rating Services analyst Ivan Tan says low mortgage rates is one of the reasons that have spurred demand for residential property in Malaysia. 
He says in a report titled “Rising property prices could expose vulnerabilities in the Malaysian banking system” that a resilient economy has also spurred demand, which in turn has driven up prices since there is also a lack of supply. 
Tan says borrower repayment ability will be supported so long as the economy remains resilient, unemployment stays low and interest rates remain low but notes that price increases have also placed the credit quality of some home loans in the spot light.
2.  Eurozone bank stress test: Plug in your own assumptions on capital ratios and haircuts, and see what's the estimated capital shortfall and how many banks would fail the test.

3. Hyperinflation in Venezuela.

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