Let's sell it to 1,000 (...and above)

No I am not refering to our KLCI but the Korean won. Our KLCI closed at 1,140 today or up 1.66% in line with the rise of the US markets and regional Asian markets due Bernanke's statement, lower oil prices and a technical rebound.

TheKoreaTimes: The South Korean currency briefly surged above 1,000 won against the U.S. dollar Wednesday as the financial authorities intensified their market intervention. The won jumped to 998.9 won against the greenback at around 1 p.m. after an unspecified amount of dollars apparently sold by the government flowed into the currency market. The local currency closed at 1,004.9 won, up 27.8 won from the previous day. This marks the first time that the won-dollar exchange rate has fallen below 1,000 won in 47 trading sessions. The authorities' intervention in the currency market was the second of its kind after the Finance Ministry and the Bank of Korea issued a joint statement Monday, pledging to work together to stem the won's excessive decline. South Korea has $258 billion worth of foreign currency reserves to support the won. The South Korean government has taken various measures to block the won's further decline after it retracted its earlier export-focused "weak won policy" amid skyrocketing oil prices and their upward pressure on inflation. A weaker won helps boost exports by making products cheaper overseas but fuels inflationary pressure by raising import prices. South Korea's consumer prices jumped 5.5 percent in June from a year earlier, the steepest gain in almost a decade. On Monday, the government intervened in the currency market by selling an estimated $2 billion, helping the won advance nearly 1 percent.

MyTake: It was reported that an aproximately USD3b was sold today besides the USD2b on Monday, to prop up the won. Before Monday's announcement, the South Korean government has drawn down up to USD10b on currency intervention. The won currency exchange rate to the USD was at its high of 898 in November 2007 while touches its low of 1,100 in March this year. Besides intervention in the local currency market to strenghtened the won, the government has also proposed to allow state-run companies to borrow in overseas currency(estimated value USD4b) and let them exchange dollar for won. I believe the moves are good in the short term to fight the stubornly high inflation. The government has probably weigh the pros and cons for intervening when the country's economic growth is slowing(in line with world economies), low confidence by locals/foreigners with the new government, the persistent selling by foreigners in the local stock market and the country's widening trade deficit of USD5.7b (1st 6 months of 2008). They know they will need plenty of money to intervene during this period, and they have it. However, if this 4th largest economy in Asia wrongly timed the intervention, the country's foreign exchange reserves even though "alot" will be reduced further while increasing short term internal debts eg issuing of government bonds. To be successful, I believe it would be better for the government after due consideration, to time the intervention at their advantage and intervene "discreetly" rather than "anticipated" to avoid speculation. They could also "talk tough" on won (just like what the US did recently) while raising the possibility of using interest rate as a tool to prop up the won. (The country's key interest rate has remained unchanged for the last 10 months at 5% pa.) With such moves, I am sure half of the battle is 'won'!

* Sir John Templeton, best contrarian investor of the 20th century, billionaire philanthropist dies at the age of 95 due to pneumonia yesterday. May god bless him.

* Will Bernanke raise interest rate this year since he commented about increasing the duration of emergency lending to investment banks? Will the USD be weakened further by then.....while we watch inflation goes up?

* Bloomberg: (1) More than 160 companies delayed or called off their IPOs worldwide this this year todate. (2) Total credit write downs todate for US banks amounted to USD178b while Europe was USD202.4b. What about Asia Pacific?

* Zeti: Malaysia's annual inflation in June is expected to exceed 6% due to a fuel price hike. Malaysia to raise interest rate in coming months?

* Indonesia's government bonds yields for 20-10 year notes is about 13.41% compared to US's 3.96% and Vietnam's 11%. It must be due to high "default" possibilities.

* SEC reported: "The major ratings firms, including Fitch, Moody's and Standard and Poor's, flouted conflict of interest guidelines and considered their own profits when rating securities, among other suspect practices". No wonder the traders now are pricing Fannie Mae and Freddie Mac's bonds of AAA to be graded as A2(ie 5 rungs lower than AAA)!