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What Global Selloff?

"...the nagging fear that the boy who cried wolf was only telling the truth when everyone had learnt to ignore him."

Authorities will closely monitor movement and watch out for any excessive herd behavior.

That’s probably what someone should be saying about the Nasdaq, or about short vol., or about Bitcoin, or about [fill in the blank with your favorite bubble], but that statement is actually from South Korean finance minister Kim Dong-yeon and he’s talking about the won.

The Korean won is now sitting at its strongest levels since September 2016 on rate hike expectations and optimism around a de-escalation of regional tensions. Decent econ hasn’t hurt either.


“1,100-1,110 represents a key support level for USDKRW and authorities are likely to be wary of the level,” Maybank’s Christopher Wong told Bloomberg on Thursday adding that in his mind, that BoK is “already smoothing the pace of decline.”


So who cares, right? Well, although there are a lot of factors at play there, it certainly seems to suggest that markets aren’t overly concerned about an imminent meltdown.

The Nikkei jumped on Thursday, snapping out of a six-day swoon with a 1.5% gain:


Meanwhile, Tencent soared after a blowout quarter:


That helped the Hang Seng rebound from its worst day day in four weeks, as investors speculate the company’s results could prompt even more money to flow from the mainland to Hong Kong:


Not everyone is convinced. “It’s a bit early to call for blue skies ahead, it feels more like a bit of bearish exhaustion taking a refresher,” Bloomberg’s Mark Cranfield wrote overnight, adding that “most major Asian indexes have yet to correct by 5%, which would be a better indication that bulls trapped at higher levels have fully capitulated.”

Who knows, right? But U.S. investors will probably be more than happy to take their cues from an upbeat overseas session. For now, I’ll leave you with some morning thoughts from SocGen’s Kit Juckes:

Bonds sold off and risk wobbled. Bonds and risk sold off in unison. Bonds rallied and risk kept on selling off and everyone started to worry. Then bonds stabilised and risk bounced. A lull before further year-end position-liquidation or business as usual as the interest rate shockabsorber does its thing? If I knew I wouldn’t be asking but my best guess is relief today followed by nervous calm. Central bankers continue to warn that markets are under-estimating the risk of higher inflation and higher rates, and the nagging fear that the boy who cried wolf was only telling the truth when everyone had learnt to ignore him, won’t go away. But I suspect that before long, we’ll get back to ignoring central bankers and the need for yield will take over again.


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