Quantitative Easing Gone Wild !!!!

Nov. 10 (Bloomberg) -- The backlash against Federal Reserve Chairman Ben S. Bernanke’s plans to buy an additional $600 billion of U.S. Treasuries may stiffen the Bank of Japan’s resolve against more aggressive monetary easing steps.

Governor Masaaki Shirakawa　signaled last week that large- scale stimulus like the Fed’s isn’t in the offing, saying that if needed the bank would expand an existing 5 trillion yen ($62 billion) asset-buying fund. Since then, China has said the Fed’s measure will fuel inflation and German Finance Minister Wolfgang Schaeuble called the U.S. plan “clueless.”

“This will support the Bank of Japan’s case for holding off from easing monetary policy,” said Takuji Aida, a senior Japan economist at UBS AG in Tokyo. “If the yen strengthens the BOJ will probably be forced to ease, but this will let it take its time.”

Any move by the BOJ to emulate the Fed’s quantitative easing might deepen global concern that emerging economies will be flooded by cash from advanced countries, leading to bubbles. Should the yen add to its 15 percent climb against the dollar so far this year, hurting exports and worsening deflation, any BOJ policy response is likely to remain smaller than the Fed’s move, according to Sumitomo Mitsui Asset & Management. ............(more)

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By Hanny Wan

Nov. 10 (Bloomberg) -- RCM Asia Pacific Ltd. is favoring raw material stocks as China moves to curb property price gains and as the U.S. Federal Reserve’s latest stimulus measure threatens to create an asset bubble in Hong Kong.

China’s government has committed to increasing the supply of public housing to ease pressure on home prices, which will benefit producers of cement and other raw materials, Christina Chung, portfolio manager for Allianz RCM China Strategy, said at a media briefing in Hong Kong yesterday. Hong Kong’s real estate valuations will increase as money from the Fed’s $600 billion of bond purchases flows into the city’s market, Chung said.

“Capital will continue to flow into Hong Kong, and under such circumstances, chances are that an asset bubble will form as prices keep on rising,” Chung said. RCM is a unit of Allianz Global Investors, which manages $1.73 trillion of assets.

The Federal Reserve announced last week a bond-purchase plan to stimulate the economy, a move known as quantitative easing. Goldman Sachs Group Inc. said in a Nov. 3 research report that Hong Kong asset prices, including real estate, would likely increase as a result of the extra liquidity released by quantitative easing programs. ...........(more)

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