Latest Global Liquidity October Update

by Michael J. Howell15. October 2014 17:12
There are few bright spots in the latest GLI (Global Liquidity Index) data which shows a fall in the month to end-September 2014 from an index of 48.0 ('normal' range 0-100) to 45.0. Liquidity conditions are sub-par and this means three things (1) flattening bond yield curves and strong bonds; (2) increasing market volatility and (3) softer economies in the future. The main causes of weak liquidity are that Central Banks are not pumping sufficient liquidity; the private sector is suffering poor cash flow growth and that liquidity in many international markets is negatively leveraged to the strong US dollar. This is not yet 2007/08 again but it looks to us very much lik 1997/98!

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Global Liquidity Index (GLI) August 2014 Update

by Michael J. Howell9. August 2014 11:44
The GLI (Global Liquidity) leading index of international capital and liquidity movements was slightly higher in July 2014 at 45.8 ('normal' range 0-100), from 44.6 in June. Developed economies have much stronger liquidity at a 62.5 index level, than Emerging Markets at 16.7. Headline global liquidity conditions are broadly unchanged over the past four months and remain a tad below average, but this disguises two major undercurrents: (1) there is an on-going switch in the direction of capital flows from Developed to Emerging Markets, even despite the fact that capital is again, as we write, quitting Russia; and (2) private sector liquidity is either weak or weakening, and Central Bank liquidity is either generally firm or strengthening.

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Emerging Markets Has Liquidity Bottomed?

by Michael J. Howell10. July 2014 16:25

The CrossBorder Capital index of Total EM Liquidity appears to have bottomed according to latest June 2014 data. The CBC index is a broad measure of money flowing into EM financial markets and leads business activity and asset prices. This is good news for investors in EM shares and should help to stabilise and refresh EM economies over the next year. The CBC EM Liquidity index hit 24.1 in June or up from 20.4 in May (‘normal’ range 0-100). Admittedly, it remains depressed, but it is finally climbing after 2-3 years in the doldrums. Weak liquidity has been the key reason why EM shares have underperformed for so long. More liquidity may now allow EM markets to ‘catch-up’.

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GLI Latest

by Michael J. Howell10. July 2014 16:22
The Global Liquidity Indexes (GLI) measure broad monetary flows through World financial markets. They are leading indicators of future asset prices and economic activity. Our 80 country GLI aggregate inched down in June 2014 to an index of 47.8 ('normal' range 0-100) from 48.3 in May. The GLI can be broken down into an Emerging Market (EM) component, which is low but managed to rise to an index of 24.1 last month and a Developed Market (DM) component, which still stands at high index levels of 65.4. The DM index dipped a tad last month but is largely unchanged since end-2013, whereas the EM index gained 3.7 points from May and is 7.8 points up over six months.

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Global Liquidity Update

BoJ Blasts

by Michael J. Howell24. June 2014 16:11
Latest weekly data from Tokyo shows that the Bank of Japan significantly upped its net liquidity provision to Y153 trillion from Y136 trillion, and compared to only Y108 trillion four months ago. The BoJ's effective balance sheet is now expanding again at a 70% annualised clip over the past 3 months. Yen down...stocks up?

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Emerging Market Liquidity (EM GLI) June 2014 Update

by Michael J. Howell13. June 2014 16:44
There are finally signs that Emerging Market liquidity is bottoming out. According to our latest GLI data, end-May 2014 saw a rise in the EM liquidity aggregate to 22.7 (‘normal’ range 0-100) from 18.5. EM liquidity is still well-below its trend, but at least it is not deteriorating as rapidly. End-May data show a strong rise in Central Bank liquidity to an index 46.5 from 39.6, helped by recent currency strength which has given policy-makers more scope to monetize inflows. Admittedly, EM private sector liquidity at 17.9 continues to look weak.

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Emerging Market Liquidity (EM GLI) June 2014 Update

by Michael J. Howell13. June 2014 16:44
There are finally signs that Emerging Market liquidity is bottoming out. According to our latest GLI data, end-May 2014 saw a rise in the EM liquidity aggregate to 22.7 (‘normal’ range 0-100) from 18.5. EM liquidity is still well-below its trend, but at least it is not deteriorating as rapidly. End-May data show a strong rise in Central Bank liquidity to an index 46.5 from 39.6, helped by recent currency strength which has given policy-makers more scope to monetize inflows. Admittedly, EM private sector liquidity at 17.9 continues to look weak.

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Global Liquidity Index (GLI) June 2014 Update

by Michael J. Howell13. June 2014 16:40
The Global Liquidity Cycle fell again to end-May 2014 to a below-par index value of 47.0 (‘normal’ range 0- 100), according to our monthly GLI (Global Liquidity Indexes). These indexes comprise all Central Bank interventions, all cross-border financial capital flows and all private sector liquidity creation, including shadow banks and corporate cash inflows, across some 80 economies Worldwide. This is now the second consecutive month of below-average World liquidity. Liquidity is a leading indicator that points to heightened tensions in financial markets and real economies 6-12 months ahead. The GLI has fallen noticeably since late-2013.

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New Report: Running Out of Dollars?

by Michael J. Howell3. June 2014 20:37
US Tapering, Chinese Tightening and Japanese and European 'Torporing' are squeezing Global Liquidity. On top, the narrowing US foreign deficit is shutting off even this depleted flow from moving overseas. We argue that liquidity risks are rising, possibly magnified by shadow banks, and certainly reflected in collapsing bond risk premia this year. Bottom line, a strong dollar means less Global Liqudiity and greater market risks.

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Emerging Markets Liquidity/ Capital Flows May 2014 Data Release

by Michael J. Howell15. May 2014 21:34
Emerging Market Liquidity remains weak according to our latest GLI data. End-April saw aggregate EM liquidity fall to an index score of 18.5 from 22.9 in March (‘normal’ range 0-100). EM liquidity is therefore below its trend and decelerating. Notably, Chinese liquidity slumped to an index value of 28.7. Typically, this is an unattractive investment environment and foreshadows an upcoming period of economic weakness.

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