Shaw Capital Management Korea: Financial Markets

For most of the past month sentiment in the financial

markets continued to improve.

There was further evidence that the global economic
recovery was still on track, and short-term interest

rates remained very low.

But towards month-end the mood changed after the
decision to downgrade Greek debt to junk status, and
to reduce the credit ratings of both Portugal and Spain.
There was a fear that the contagion would spread still
further, and that the bond market pressures resulting
from the massive fiscal deficits around the world would
have serious financial consequences.
There was always the risk that some of the measures
that were introduced to counter the recession might
have adverse consequences, and this is now proving

to be the case.

Shaw Capital Management Korea: Major Equity Markets

Related Coverage

• Taiwan's Economy: By Shaw Capital Management Korea
With gross domestic product clocking 10.2% growth from a year ago in the fourth quarter, and 4.2% from the previous quarter, Taiwan returned to pre-financial crisis growth levels. In spite of the strong recovery in the second half of the year.
• Foreign Exchange Markets 2010: Shaw Capital Management
The main feature of the foreign exchange markets over the past month has been the further sharp fall in the euro. There has been no real change in the background economic situation in the euro-zone; but there has been a serious deterioration in the financial background as doubts have increased about the ability of Greece and some other periphery countries to cope with their massive fiscal deficits and service their sovereign debts.
• Shaw Capital Management: South Korea's Economy
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China's Economy: by Shaw Capital Management Korea - China will continue fiscal stimulus spending and its current monetary policies this year as the country has, in the opinion of the Chinese Communist Party, not fully recovered from the economic downturn.

After moving ahead for most of the month, most of the
major equity markets are ending the period unchanged
or slightly higher, and there have been sharp falls in

many of the minor markets.

Wall Street has been the exception, and is ending
higher, encouraged by some favourable corporate

results.

But markets in Europe, including the UK, are lower,
and there have been falls in the Chinese market, and
other Asian markets, after the measures by the
authorities to reduce the risk of over-heating in the

Chinese economy.

However views about longer-term prospect are still
fairly positive, and the markets seem to be simply
pausing until some of the uncertainties have been

resolved.

Bond markets; have produced a mixed performance,
with the major markets holdings fairly steady, despite
the worsening background situation, but with the minor
markets, especially in Europe, suffering very sharp
falls, and yield spreads between the stronger and weaker

markets opening up to record levels.

The threat of sovereign debt defaults has increased
and urgent action is needed, especially in Europe, if
they are to be avoided.
However there are also warnings that similar conditions
could develop in the UK and in Japan if there are no
early moves to reduce the level of fiscal deficits.
It is still expected that an aid package will be agreed
to avoid a default on Greek debt; but this may only

provide temporary relief.

Shaw Capital Management Korea: Currencies

Movements amongst the major currencies have been
relatively small over the past month.
However the weakness of the euro has enabled both
the dollar and sterling to improve as investors have
rushed to reduce their exposure to the European

currency.

There is a fear that the debt problems affecting Greece
and other countries in the euro-zone will make it
extremely difficult to restore the credibility of the euro,
and that it might make it necessary for some countries
to leave the single currency system, at least on a

temporary basis.

Shaw Capital Management Korea: Short-Term Interest Rates

There have been no changes in short-term interest
rates in the major financial centres over the month.
The Bank of Canada though has indicated that it is
considering pushing rates higher, and this has
encouraged speculation that other central banks may

be planning similar moves.

Shaw Capital Management Korea: Commodity Markets

Moved higher over the past month as sentiment in the
financial markets improved.

Shaw Capital Management: Brazil's Economy

Brazils economy emerged from a deep but short recession in the second half of last year. The economy is expected to grow by at least 5.5% this year. But along with economic growth, expectations of higher inflation have also returned.

Shaw Capital Management Korea: Brazils Economy - The governments target for annual consumer price inflation is 4.5%. To contain inflation Brazils central bank has raised banking reserve requirements on term deposits from 13% to 15%. In addition to the increase in reserve requirements, the bank also restored additional charges on cash and term deposits to 8% from 5% and 4%, respectively.

According to the Central Bank President Henrique Meirelles, the changes were necessary to neutralize the impact of excess liquidity brought by reserve requirement reductions made in 2008, amid the onslaught of the global financial crisis.

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• China"��s Economy: By Shaw Capital Management Korea
China"��s Economy: by Shaw Capital Management Korea - China will continue fiscal stimulus spending and its current monetary policies this year as the country has, in the opinion of the Chinese Communist Party, not fully recovered from the economic downturn.
• Shaw Capital Management: South Korea"��s Economy
South Korea"��s output is continuing to accelerate, and the government needs to exit from its accommodative economic policies earlier than anticipated. The HSBC Korea"��s purchasing managers"�� index (PMI) rose from 55.6 in January to 58.2 in February "�" the highest since December 2007.
• Taiwan"��s Economy: By Shaw Capital Management Korea
With gross domestic product clocking 10.2% growth from a year ago in the fourth quarter, and 4.2% from the previous quarter, Taiwan returned to pre-financial crisis growth levels. In spite of the strong recovery in the second half of the year.
• Shaw Capital Management News: Washington Waxes Brazilian
Brazil provides us with an example of a rapidly developing, energy-hungry economy in the Western Hemisphere, where biofuel is a fact of life. Biofuel is also an investment imperative for energy investors and companies that want to make money in Brazil. As an important part of the #3 economy in the Americas, ethanol can't be ignored by the United States.

However, for the central bank it would be a politically difficult task to raise interest rates in the run up to Brazils presidential, congressional and other elections in October.

Shaw Capital Management Korea: Brazils Economy - The government has launched a new investment trust to invest in the domestic Brazilian economy. BM&F Bovespa, the So Paulo equities and derivatives exchange is to raise its stake in the CME Group of Chicago, the

worlds biggest exchange group, to 5% in an attempt to attract more institutional and retail investors to Brazil.

Shaw Capital Management Korea: Brazils Economy - The plan for the two exchanges is to work together to develop a new multiasset electronic trading platform based on the CMEs Globex system.

President Lula da Silva, the most popular President in Brazilian history, would like to see Octobers presidential election as a plebiscite on his eight years in power.

He is asking voters to transfer his success to Ms Dilma Rousseff, his chief minister, whose candidacy has been endorsed by his Workers party (PT).

Shaw Capital Management Korea: Brazils Economy - Ms Rousseff is further to the left than the present administration, but she has pledged not to make a sudden change of direction. The investors andvoters believe her so far.

We look forward to working with you and being the open architects of your financial well being.

Our goal is to provide consistent quality investment advice to our clients. Although the stock market provides many facets of opportunity for today's investor, there are always just a few stellar markets or niche companies at any given time. It is true that in a healthy market, investments yield favourable returns in a given growth area. The key is to pick those investments that are driving the trends and will become tomorrow's brightest stars.

One problem is proper allocation of research resources. It is true there is power in numbers, and teams of researchers will generally spot and confirm trends that the individual investor would miss. But on the other hand, too broad of an effort will squander research resources and loose sight of those special investments in an overwhelming sea.

Developing Strategic Research Capital. By having broad and robust resources, then viewing and deploying those resources in a multi-dimensional fashion, a balanced research model is created yielding greater and more focused results. In short, Research Capital. To achieve this result, research is targeted to different dynamics of the market rather than a flat view of just general market trends.

Market trends are viewed across a broad spectrum for change and interaction with associated segments, and then for life and duration of changes.

From this initial analysis comes the ability to focus resources on those segments and opportunities that will shine brightest and meet your investment goals. This is the result of a properly developed research program yielding the greatest return of Research Capital, in short a wealth of specific focused knowledge to provide the depth of advice you need to make the right decision.

At Shaw Capital Asset Management your investment is important to us. That same care in managing our Market Analysis Research Strategy provides you with the information you need to make the right choice.

Foreign Exchange Markets 2010: Shaw Capital Management

The main feature of the foreign exchange markets over the past month has been the further sharp fall in the euro. There has been no real change in the background economic situation in the euro-zone; but there has been a serious deterioration in the financial background as doubts have increased about the ability of Greece and some other periphery countries to cope with their massive fiscal deficits and service their sovereign debts.

Foreign Exchange Markets 2010: Shaw Capital Management Korea: This is clearly leading to a withdrawal of international funds from the European capital markets, and is dramatically illustrated in the widening of yield spreads in the bond markets of member countries. There is still a general assumption that the stronger members will provide support for the weaker members if this proves to be necessary to prevent a default on sovereign debts.

But the uncertainties have been increased by conflicting statements from the European Central Bank and some politicians about the willingness to undertake such operations, and so investors and speculators have taken evasive action, and the euro has fallen by around 10% from its peak in early-December.

This fall has provided support for the other major world currencies, including the dollar; but the background situations in Japan, and in the UK, also provide reasons for concern, and so the currency markets remain in a very uncertain state.

Foreign Exchange Markets 2010: Shaw Capital Management - It is likely that the uncertainty will continue.

Related Coverage

• Foreign Exchange Markets 2010 Part 3: Shaw Capital Management
The recent State of the Union message to Congress by President Obama included a request for the approval of a further fiscal stimulus package this year amounting to around $100 billion to help to tackle the unemployment problem, and he has also presented a $3.8 trillion budget for fiscal 2011 that is likely to maintain the overall deficit around the $1.35 trillion level expected this year.
• Shaw Capital Management News -foreign Exchange Markets 2010 Part 4
Prospects therefore remain disappointing, and are being made worse by the differences that exist between member countries. The European Central Bank therefore faces a difficult situation.
• Foreign Exchange
Earning profits within the currency trading market is a piece of cake for somebody while others find it extremely tough to manage. The reply for this is quite simple. Most individuals are lured by the large amount of cash that changes hands in this marketplace.
• Government Bond Markets: Shaw Capital Management February Newsletter
Government bond markets have ended 2009 on a very disappointing note. A further improvement in sentiment about the prospects for the global economic recovery, and indications that some central banks might be preparing to introduce early "��exit strategies"��

The US economy is clearly recovering from recession; economic conditions in Japan are very weak, and Japan appears to face the possibility of a credit downgrade if it does not take steps to reduce its massive fiscal deficit; and there have already been warnings from Standard and Poors that the UK also faces the possibility of a credit downgrade if there are no convincing measures to reduce its huge fiscal deficit after the forthcoming general election.

Prospects are therefore very difficult to assess; but our tentative conclusion is that the dollar will continue to improve, helped to a considerable extent by weaknesses elsewhere; and that this will allow market pressures to gradually subside as the global economic recovery continues through the year.

But the possibility of a major currency crisis cannot be ignored, especially if the debt problems in Greece and other periphery countries threaten to lead to the break-up of the single currency system in Europe. It is fortunate therefore that the available evidence on the performance of the US economy is more encouraging. Non-farm payrolls fell again in December by 85,000, but are expected to have increased in January; retail sales held up well in the pre-Christmas period; manufacturing output is improving, according to the latest report from the Institute of Supply Management; and even the housing market appears to be recovering.

This general situation is reflected in the first preliminary estimate from the Commerce Department of growth at a seasonally adjusted annualised rate of 5.7% in the final quarter of last year, a higher figure than the market had been expecting. Most economists therefore appear to be forecasting overall growth this year in the 2.5% to 3% range, after the estimated fall of 2.4% last year.

Foreign Exchange Markets 2010: Shaw Capital Management - The Fed is clearly in no hurry to tighten its present monetary stance. The statement after the latest meeting of its Open Market Committee was more upbeat about the prospects for the economy; but shortterm interest rates were left unchanged and close to zero, and there was a clear indication that they would remain at very low levels for an extended period.

The bank did state that it will discontinue most of its emergency lending programmes, and that it would end its purchases of mortgage securities in March; but there was no indication that it would be prepared to implement an exit strategy until there was convincing evidence of a sustainable economic recovery. It is also unlikely that there will be any early changes in fiscal policy.