LONDON, September 16, 2015 /PRNewswire/ --
After this summer's dramatic stock market and currency crash in Asia, traders are eager for insights into which Asian currencies may offer potential value.
New research by independent strategist, Olivier Desbarres, suggests that while all non-Japan Asian currencies have weakened in the aftermath of China's so called "Black Monday", it is important to differentiate them from one another.
Using a number of broad variables including their economies' exposure to oil and gas prices, the performance of merchandise exports and industrial output; the correlation to the Chinese renminbi, currency seasonality and levels of external debt, Desbarres has created a "currency heat-map" to compare non-Japan Asian currencies.
According to Desbarres, the Thai baht and the Korean won are looking the most attractive and may outperform their peers going forward, due to the fact that their countries' economies will benefit from the fall in oil and gas prices.
"The Thai baht and the Korean won are not without risk though," warns Desbarres, "with industrial output shrinking and exports contracting, the central banks may cut their policy rates - potentially causing these currencies to weaken."
The most vulnerable currencies, according to the research, are the Malaysian ringgit and the Indonesian rupiah. As Desbarres points out "Malaysia's external debt, both short and long-term, is among the highest in Asia as a percentage of GDP and of central bank FX reserves." And where Indonesia is concerned, he says: "the fall in the demand for and price of commodities, including oil, gas and coal, has crushed total exports."
The heat-map is also tests whether Asian currencies exhibit a degree of seasonality. Historically, most Asian currencies have been weak in September. Interestingly, the Chinese renminbi - which according to Olivier Desbarres' research is looking 'somewhat attractive' - has enjoyed positive seasonality in the month of September.
Currencies typically correlated with the Chinese renminbi may be at greater risk if the Chinese central bank decides to further devalue its currency. Of the Asian currencies studied, the Thai Baht is perhaps the least correlated to the renminbi - another reason why it may outperform going forward.
The Indian rupee looks fairly attractive. India's exports have held up better than in most Asian economies. But as Desbarres warns, "the Indian rupee is vulnerable due to its close correlation with the renminbi".
Desbarres will use this heat-map to monitor any disproportionate changes in these economic variables in coming months and to highlight whether any of these currencies have become particularly cheap or expensive.
Olivier Desbarres currently works as an independent commentator on G10 and Emerging Markets. He has over 15 years' experience with two of the world's largest investment banks as an emerging markets economist, rates and currency strategist.
For more information visit http://www.olivierdesbarres.co.uk/