By John Richardson

WHEN the tide eventually goes out, we will find out who has been swimming naked.

This will also be the case in several emerging markets, ex-China, when the Fed eventually draws down its stimulus.

Hot money seeking higher returns has flowed into India, Indonesia, Thailand, the Philippines and Malaysia, for example, thanks to quantitative easing.

In chapter 3 of our book, Boom, Gloom & The New Normal, we discuss how some journalists and analysts looked for long-term fundamentals behind the 2005-2008 surge in crude-oil prices, after the speculative money had flowed in. In reality, though, oil only went up because of the hot money. The record high prices we saw until the September 2008 crash had little to do with actual supply and demand.

To some extent, the same applies to certain emerging markets outside China (and, of course, China has its own set of problems).

The long-term opportunities in all of these countries remain tremendous, but the hot money has led to deep structural problems being overlooked.

Now in India, though, as speculative money flows in the opposite direction, more and more people are, rather belatedly, asking the question “Will the country ever have the politicians it needs to achieve its economic potential?”

Indonesia has many solid reasons for long-term confidence. But, again, the speculative money has very probably led to people largely ignoring unresolved issues, such as lack of investment in infrastructure.

And, ironically, the Indonesian government is struggling with the social, economic and political consequences of a reform hastened by quantitative easing: Unwinding fuel subsidies.

If Fed policy hadn’t once again badly distorted oil prices, by raising them way beyond the fundamentals of supply and demand post-2008, Indonesia might have had more time to enact such a difficult reform.  The chart above, from this article in The Economist, explains why Indonesia is in a hurry.

The other worry, of course, is that speculative funds have created property and other asset bubbles in countries such as Indonesia and Thailand that could very quickly go pop as money moves in the opposite direction.

The most exposed, according to this article in The Financial Times, are “countries current account deficits: those that buy more from foreigners than they sell, and need international capital to bridge the difference. That list is now a long one.”

When we eventually find out who has been swimming naked, some of the new cracker and refinery-petrochemicals projects in Southeast Asia may well be shelved.


Crucial Six Months For China


  By John Richardson CHINA’S immediate credit scare appeared to ease some...

Learn more

Asia's Naphtha Crackers


By John Richardson ONE industry observer describes some of the cracker and refin...

Learn more
More posts
Making all the stuff the world needs in sustainable ways is our defining challenge

By John Richardson YOU ARE a global petrochemicals producer either headquartered in Europe or with m...

China’s petchems market rally: we don’t have enough data to decide whether it is sustainable

By John Richardson CHINA’S PETROCHEMICAL prices typically increase when the Lunar New Year (LNY) h...

China PX imports could fall by 64% in 2021 with styrene imports 59% lower

By John Richardson AS OF yesterday, around 70% of US paraxylene capacity was offline. No less than 6...

China’s PP imports in 2021 could fall by as much as 53% over last year

By John Richardson TODAY I get closer to completing my outlooks for China’s petrochemical and poly...

China slowdown may be the biggest petchem event in H1, not US and European tight supply

By John Richardson I SUSPECT that the bigger story for the global petrochemicals industry in H1 may ...

China’s ethylene glycols imports could decline by 45% in 2021

By John Richardson LET ME start with the good news first. As with the global polyethylene (PE) and p...

China’s polyethylene imports set to remain very strong in 2021

By John Richardson DEMAND, as I discussed on 11 February, will not be a problem for the global polye...

Petrochemicals and demand: a deer caught in the headlights

By John Richardson THE THING is, as I discussed in my 9 February blog post, we simply do not have ou...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more