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Five Things - Asia
Bloomberg

Stocks at records with Dow Jones topping 30,000. The best and worst places to ride out the pandemic. China on track for a strong rebound.

Good Times Are Back

The Dow Jones Industrial Average topped 30,000 for the first time and investors piled into risk assets as a series of market-friendly developments unleashed animal spirits on Wall Street. The rally is set to extend in Asia. The S&P 500 Index hit a record, spurred by the formal start of President-elect Joe Biden's transition. A third promising vaccine candidate added to the euphoria. President Donald Trump touted the gains and vaccine progress in a very short press conference. The rotation into risk assets was widespread. Treasuries retreated with the dollar, gold dropped and oil surged. Bitcoin rose to a three-year high, topping $19,000.

Virus Best, Worst Places 

As Covid-19 has spread around the world, it's challenged preconceptions about which places would best tackle the worst public health crisis in a generation. Advanced economies like the U.S. and U.K. have struggled while other countries — even developing nations — have defied expectations. Bloomberg crunched the numbers on 53 economies to determine the best and worst places to be in the coronavirus era.

Visit Scrapped

EPA chief Andrew Wheeler is canceling a planned trip to Taiwan next month that had threatened to stoke anger with Beijing, after concerns were raised about the costs of the travel near the end of the Trump administration. "Due to pressing domestic priorities at home, Administrator Wheeler's visit to Taiwan has been postponed," Environmental Protection Agency spokesperson James Hewitt said Tuesday by email. Wheeler's trip was originally planned following several high-level visits by U.S. officials to Taiwan in recent months, and stepped-up arms sales that have angered China.

'Proper' Range

China will likely return to a more "proper" range of economic development next year, Premier Li Keqiang said, indicating a strong rebound in growth after this year's pandemic slump. After taking a severe knock in the first quarter, the economy is recovering and set to post positive growth this year, Li said at a joint media briefing Tuesday alongside the leaders of six international economic institutions, including the International Monetary Fund and World Trade Organization. China recently laid out its five and 15-year plans for the economy, outlining an ambition to double the size of gross domestic product by 2035.

Flying Doubts

Airlines have loudly insisted that it's safe to fly during the coronavirus pandemic, and U.S. travel is surging before the Thanksgiving holiday despite a nationwide spike in virus cases. Yet top U.S. infectious disease experts say the findings underpinning the carriers' safety claims aren't that conclusive. The risk of being infected with the novel coronavirus on planes — which have highly effective filters that remove virus from the air and where mask usage is required — is probably fairly low, scientists say.

What We've Been Reading

This is what's caught our eye over the past 24 hours:

And finally, here's what Tracy's interested in today

It's not hard to imagine a future world where carry trades abound. The appointment of Janet Yellen to U.S. Treasury Secretary implies a coherence around domestic currency policy that's been missing in the Trump administration (which often ended up unsettling financial markets as it threatened global trade, thereby pushing the greenback higher). In a weak-dollar world, using cheap dollars to buy higher-yielding assets in emerging markets is one attractive way of generating returns. It means there could be a flood of money into certain emerging markets, and this deluge of "hot money" is not always welcome locally. On a similar note, the market crash in March 2020 sent the dollar surging and financial conditions tightening, which then led to foreign investors yanking money out of the developing world in a dramatic and potentially destabilizing way.

Those are the scenarios I'm thinking about as I read a new report from the Independent Evaluation Office (IEO) of the International Monetary Fund (IMF), the group charged with evaluating IMF policies. For years, the IMF has frowned on capital controls and generally encouraged developing countries to liberalize their capital accounts. But the new report suggests a rethink of capital controls is needed. IMF guidance "discouraging the pre-emptive or long-lasting use of capital flow measures is at odds with country experience and recent research that such use can be helpful to address financial stability concerns and to provide more space for macroeconomic policy," it says.

A new approach towards capital controls would be yet another example of the way the events of 2020 are reframing traditional economics, with the possibility that more actively directing the flow of money into and out of one's respective country becomes much more acceptable. In any case, the authors of the IEO report will be on an upcoming edition of the Odd Lots podcast. Subscribe so you don't miss it.

You can follow Tracy Alloway on Twitter at @tracyalloway.

 

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