FT: Trump’s campaign rhetoric raises stakes in Mexico

Traders are trying to work out whether the peso is now cheap.

The problem is trying to work out how the US-Mexico impasse will unwind. The backdrop is a world of change, underlying structural tensions and trade inconsistencies, says Stephen Jen of Eurizon SLJ Capital.

“We see Mexico as being at the crossroads of many of the issues that are being discussed at present, and the only positive for the peso is its cheap valuation,” he says.

Read the original article on the ‘FT’ website.

Bloomberg: Dollar Overshoot Raises Risk of ‘Dangerous Year’ in Equities

A closer look at when the dollar appreciates above measures of fair value over the last half century suggests that the current rally has more room to run. That may not translate into good news for investors piling into U.S. equities as part of the Trump reflation trade.

“The dollar is overvalued, but currencies tend to push that,” said Stephen Jen, the London-based chief executive of hedge fund Eurizon SLJ Capital Ltd. “History suggests the overshoots tend to be very large in size, much larger than one would think are possible.”

Read the original article on the ‘Bloomberg’ website.

Bloomberg: Yen to Hit Bottom at 120 Before Rallying, Economist Jen Says

The yen will slump to 120 per dollar in six months as the Federal Reserve raises U.S. interest rates but that’s about as weak as it will get, former International Monetary Fund Economist Stephen Jen says.

The currency will rebound to 100 by early 2018 as the Bank of Japan’s policies of controlling yields and adding stimulus through bond purchases reach a limit, said Jen, chief executive officer at hedge fund Eurizon SLJ Capital Ltd. in London. The central bank already holds more than 40 percent of local government bonds on issue, up from 14 percent before it started an expanded debt-purchase program in April 2013.

“The BOJ is closer to the limits of their unconventional monetary policy than any other central bank,” Jen said in an interview last week. Once all its options are exhausted, the yen will return to its fair value of around 90 per dollar, he said.

Read the original article on the ‘Bloomberg’ website.

FT: Slow growth in Mexico casts doubt on merits of Nafta

“Despite joining Nafta, the economic growth rate of Mexico has been remarkably slow in recent decades, not only compared to its own past but also relative to many other Latin American economies,” says Stephen Jen, head of Eurizon SLJ Capital, an investment fund.

“It is just not evident, by eyeballing charts on Mexico’s macro data, that Nafta has had any meaningfully positive effects on the Mexican economy. Mexico is quite a remarkable economy, in a negative sense, unfortunately. It has tried hard but achieved little.”

Read the original article on the ‘FT’ website.

Bloomberg: China’s $1.4 Trillion Silk Road Is Bigger than the Marshall Plan

Dubbed ‘One Belt, One Road,’ the plan to build rail, highways and ports will embolden China’s soft power status by spreading economic prosperity during a time of heightened political uncertainty in both the U.S. and EU, according to Stephen L. Jen, the chief executive officer at Eurizon SLJ Capital Ltd., who estimates a value of $1.4 trillion for the project.

“This is a quintessential example of a geopolitical event that will likely be consequential for the global economy and the balance of political power in the long run,” said Jen, a former International Monetary Fund economist.

“The fact that this is a 30-40 year plan is remarkable as China is the only country with any long-term development plan, and this underscores the policy long-termism in China, in contrast to the dominance of policy short-termism in much of the West,” said Jen.

Read the original article on the ‘Bloomberg’ website.