Qe3 Boosts Stocks, Gold And Bond Prices

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ECONOMY

QE3 boosts stocks, gold and bond prices

Business Reporters

The Nation

SET hits 16-year high, baht rises amid fear of huge capital inflows

BANGKOK: -- Stocks, gold, the baht and bond prices soared yesterday on the US Federal Reserve's announcement that it would continue injecting liquidity into the troubled US economy, at least until the employment situation improves. However, experts are warning that large capital inflows could create an asset-price bubble in the Kingdom.

The Finance Ministry has come up with measures to counteract the possibility of a too-large inflow of short-term funds after the Fed announced yesterday that it would purchase mortgage-backed securities worth US$40 billion (Bt1.23 trillion) per month. It will also purchase other long-term securities worth $85 billion per month until the 8.1 per cent level of unemployment in the US drops to a desired level.

The Stock Exchange of Thailand Index yesterday closed at 1,272.60, reaching a 16-year high, increasing 14.91 points or 1.19 per cent from the previous day. Trading volume jumped to Bt57 billion, a 13-month high. Big market cap shares such as PTT, Bangkok Bank and PTT Global Chemical rose significantly. The surge pushed SET's market capitalisation past Bt10 trillion, SET president Charamporn Jotikasthira said.

"The market will be highly volatile for the rest of the year as policy-makers of major economies implement new measures. Long-term investors should monitor whether shares prices exceed their fundamental values, since the SET rise this time has been driven by capital inflows from abroad," he warned. Asian stocks rose in tandem.

Veerathai Santiprabhob, chief strategy officer of the SET, said that "Asia is likely to benefit from the capital inflows, in particular Asean and Thailand, but what we have to watch closely is the possibility of too much inflow, which could drive asset prices up beyond their fundamental values, leading to a bubble."

The baht appreciated against the US dollar yesterday, trading at 31.01-31.03 per dollar when the market opened and closing at 30.75-30.77. The trading level of 30.75 seen during the day marked a six-month high, said Thiti Tantikulanan, head of the capital market business division of Kasikornbank. He predicted that the US dollar would further weaken to about Bt30.50 within a month. He said that bond yields increased slightly to 0.3 per cent, while the gold price increased $30-$40 per ounce in Europe since the market has already priced in the US quantitative easing (QE).

Usara Wilaipich, senior economist at Standard Chartered Bank (Thailand) said the baht will stabilise at around 31.10 to the dollar at the end of this year, adding that it had risen to the Bt30.80 level now due to the short-term impact of QE.

Kittiratt Na-Ranong, deputy prime minister and finance minister, reacting to the global development, said: "Obviously it's a positive impact because the whole world has been expecting the QE. I believe that it's good that it has come out this early, this soon, because the last thing the world wants is something too little too late."

He expressed concerned that the inflow would cause the baht to appreciate to a level that would adversely affect exports.

Areepong Boocha-oom, permanent secretary for finance, said the ministry is prepared to take steps to prevent greater short-term inflows that could destabilise economy.

Wasin Saiyawan, head of the financial markets division of Siam Commercial Bank (SCB), said large capital inflows may end up in the bond market, driving down bond yields.

Singhachai Boonyayoyin, the senior director of the Bank of Thailand's financial markets department, said the baht rose 0.6 per cent immediately after the QE. However, he said that so far exporters had adjusted very well to exchange movements.

The Malaysian ringgit led the currency rises, gaining 1 per cent from the day before. Taiwan's dollar was up 0.7 per cent, the Singapore dollar increased 0.5 per cent and the Philippine peso rose 0.4 per cent.

Chitti Tangsithipakdee, president of the Gold Trading Association said the gold price increased more than expected due to the large scale of QE. The price rose $100 to $1,750 per ounce in Asia, compared to an increase of $40 per ounce in Europe.

Ariya Tiranaprakij, vice president of the Thai Bond Market Association, said due to the latest QE, foreign investors have switched their investments from short-term bonds to longer-term 5-, 7- and 10-year instruments, resulting in a drop in bond yields to about 0.05 -0.1 percentage points (as bond prices rose). This year foreign investors' holding of Thai bonds have jumped 61.24 per cent from last year to Bt677.20 billion, accounting for 8.2 per cent of the Thai bond market by value. "It is good for the country as the government plans to raise Bt525 billion from the bond market to finance public investment," she said.

-- The Nation 2012-09-15

[rakman]

QE 3 also increased the price of oil and increases inflation on food and shipped goods. QE3 is touted as a way to increase jobs. It won't work.

Now that oil will go above US$100 per barrel and gas will be near US $4 per gallon in the US, people and small business will move to hold on to money and not buy or hire. This will have the undesired effect of slowing the economy and losing jobs.

Now everyone will pay the "tax" of higher fuel and food prices.

Wait until the rebound effect hits as the money is brought back into the Fed, very high interest and even higher inflation.

This administration has no clue how to foster an environment that allows for job creation.

At least those who have stocks and holding gold will see some returns.

Edited September 15, 2012 by rakman

[MJP]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

Edited September 15, 2012 by MJP

[yoshiwara]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

Is that a speech in favour of the ECB?

[MJP]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

Is that a speech in favour of the ECB?

Nah, get rid too.

[rakman]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Edited September 15, 2012 by rakman

[MJP]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Something not printable by the FED.

[MrRealDeal]

You could replace the fed by following the constitution ......... what a concept ! .......... it's not really expected to create jobs it's expectation is to postpone a recession. For those that dont know the usa constitution, elected officals called congressmen were intended to control the money supply instead of private bankers for obvious reasons. I'm not claiming that the fed reserve act is illegal but it's just not the way the constitution intended it to be, once again for obvious reasons.

Replacing the dollar with another currency would be useless as the same greed and money printing would happen by any country because they are also humans with the same flaws as the usa.

We live in an imperfect world run by imperfect people and always will , Fed bubbles and dilution of the value of money is a fact of life for our lifetime because thats all they know.

The smart money will spend more time, short term investing in the bubbles and in the future buying puts or shorting the bubbles rather than investing for the long term because it's simply a faster way to create wealth. imo

[mania]

You have to love how this chart & most news claim report

Q3 as 40B per month

But the truth is a lot higher.

Even this article itself points out,

Fed announced yesterday that it would purchase mortgage-backed securities worth US$40 billion (Bt1.23 trillion) per month. It will also purchase other long-term securities worth $85 billion per month until the 8.1 per cent level of unemployment in the US drops to a desired level.

What an open ended statement.

until UE reaches 8.1?

[JSixpack]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

There's just nothin' better than knockin' back a few Changs and hittin' the internet forums!

[morrobay]

When Clinton left office there was a budget surplus, a good economy, a strong dollar and no QE's

Bush was appointed by the supreme court and starts two wastfull wars, cuts taxes , promotes reckless financial deregulation with that hack greenspan.

That caused the financial crisis. By a financial sector that is so powerful that they cannot be held accountable.

The country has been taken to ruin.

[ExpatJ]

I have a nagging feeling that stocks already priced in this round of QE and that the downgrade of US last week plus Euro problems may suddenly reemerge in coming days and cause another market drop.

[MrRealDeal]

The market drop will come from bad earnings not from 40 billion more funny money added to the system each month. The part that was priced in was less than what it got so it's not going to stay down on that alone.

[Naam]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Something not printable by the FED.

som tam?

[mania]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Something not printable by the FED.

som tam?

That would be worse because it literally grows on trees

[MJP]

Denial, anger, acceptance.

US, UK, Eurozone are finished.

http://papermoneycollapse.com/2012/09/stimulus-to-infinity-and-beyond/

Edited September 16, 2012 by MJP

[T_Dog]

Friend sent me this video today which is quite interesting. He actually poses a few solutions about 20 minutes in. But...Like Matt Taibbi says in "Griftopia", it's a Wall Street government currently.

[JSixpack]

Denial, anger, acceptance.

US, UK, Eurozone are finished.

http://papermoneycol...ity-and-beyond/

http://zapatopi.net/afdb/

http://theflatearthsociety.org/cms/

[rakman]

When Clinton left office there was a budget surplus, a good economy, a strong dollar and no QE's

Bush was appointed by the supreme court and starts two wastfull wars, cuts taxes , promotes reckless financial deregulation with that hack greenspan.

That caused the financial crisis. By a financial sector that is so powerful that they cannot be held accountable.

The country has been taken to ruin.

Not totally true.. Clinton's budgets were $2.7 Trillion, and spending was brought under some control, i.e. the rate of increase was lessened. Clinton got the benefit of the "Dot Com" bubble with massive investments that ultimately went bust and billions in capital gains. There never was a surplus, just the projection of a surplus, if nothing changed. When Clinton left office, there was a recession going on. Then there was 9/11/2001 (you forget that?) which put a major hit on the economy. The Afghans would not give up Osama so that war was on.

Saddam Hussein figured he could keep expanding the mockery of "Oil for Food" and keep expanding the his belligerence to the west, so it was time to put him out of office.

At first, the wars were fought to win in a reasonable period of time, then the politics got involved and the war went to "Police Action" mode. Rules of engagement went to "ask higher ups" for permission to fire, even while taking rounds. Stand off weapons were no longer allowed to be used. Seems some people didn't think we were fighting fair since there wasn't parity in casualties.

We could go back to Clinton's tax rates, as long as we went back to Clinton's spending levels.

The only way to solve this problem is to grow out of it, by making long term policies to enhance job creation, not short term policies that make more uncertainty in the market place.

The US now has the lowest employment participation rate since the 1960's. in only 10 of the last 42 months has job creation exceeded 150,000, the minimum to keep unemployment steady as population grows. The UE index is simple: 1) if you have a job you're employed; 2) if you don't have a job and are getting unemployment, you're counted as unemployed; 3) if neither, you don't exist. That's why the UE is down to 8.1% last month since 96,000 found jobs, 396,000 went off unemployment benefits.

QE3 is open ended, it will stop when the "desired effect" is reached, whatever that means. US $40 billion dollars per month of newly "created" money from thin air.

[rakman]

Denial, anger, acceptance.

US, UK, Eurozone are finished.

http://papermoneycol...ity-and-beyond/

In the 1970's, when President Carter moved the US down to despair, high interest rates and stagflation, the same thing was said about the US. The US is still the largest manufacturer, and one of the only countries capable of digging out of this hole.

The first rule when you find yourself in a hole is: "STOP DIGGING"

[rakman]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Something not printable by the FED.

So what would that be? Yuan, rubles, pounds? Coconuts? You can make a currency out of thin air, like the euro, but it won't last, unless there is something to back it up. Europe keeps writing checks their economies can't cash.

[MJP]

Denial, anger, acceptance.

US, UK, Eurozone are finished.

http://papermoneycol...ity-and-beyond/

In the 1970's, when President Carter moved the US down to despair, high interest rates and stagflation, the same thing was said about the US. The US is still the largest manufacturer, and one of the only countries capable of digging out of this hole.

The first rule when you find yourself in a hole is: "STOP DIGGING"

"STOP PRINTING", surely?

[MrRealDeal]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Something not printable by the FED.

So what would that be? Yuan, rubles, pounds? Coconuts? You can make a currency out of thin air, like the euro, but it won't last, unless there is something to back it up. Europe keeps writing checks their economies can't cash.

Their is something to back it up .......... the taxes on people for generations to come. The entire world is doing the same basic thing the end result is going to be what they want eventually anyhow one world currency controlled by the World Bank backed by nothing once again except the taxes on the people.

[cloudhopper]

http://www.zerohedge.com/contributed/2012-09-16/i-go-ny-fed-illustrate-lies-perpetrated-fed-chairman-himself

[T_Dog]

http://www.zerohedge...hairman-himself

Reggie would make a good running mate for someone......

[yoshiwara]

I have a nagging feeling that stocks already priced in this round of QE and that the downgrade of US last week plus Euro problems may suddenly reemerge in coming days and cause another market drop.

Do you take financial positions based on these nagging feelings.

How often do you get them? Daily? weekly? hourly?

[Naam]

The US Dollar needs scraping as the World's reserve currency. Wall Street and the City of London also need to be mothballed. Also the FED and the BoE.

And replace the US Dollar with what? What's wrong with the two stock markets? Should all stock markets be banned? I could agree that central banks (private enterprises for government currency) should be abolished.

Something not printable by the FED.

So what would that be? Yuan, rubles, pounds? Coconuts? You can make a currency out of thin air, like the euro, but it won't last, unless there is something to back it up. Europe keeps writing checks their economies can't cash.

that must be the reason why the EUR gained 9% in 6 weeks vs USD.

[churchill]

As 'Yashiwara ' would say to ' Naam '

"Holy strawberries Batman! We're in a jam!"

[Rancid]

The Federal Reserve is owned by its member banks...the usual suspects. This is another bank bailout as virtually all of those banks are technically insolvent without even getting into the derivatives. The only boost to the economy will be bankers spending their bonuses on new cars, boats and houses, hardly a boost for unemployment, just the sheep being lies to again as inflation eats away at their savings and retirees can't get a decent interest rate to live on.

As an aside how bad financially actually were many of those European countries before they bailed out their banks? So the austerity is being used on those populations to keep the bank bonuses flowing. Are we seeing an emerging pattern here somewhere? Only difference is that with the US with its reserve currency, they are printing and racking up the debt rather than austerity.

[HardenedSoul]

The open-ended nature of this round of QE prevented the "sell-the-news" market reaction so many were expecting.

A lot of traders had to cover their shorts in metals and equities.