The DailyBrief

Friday January 13, 2017

US Secretary of State nominee Rex Tillerson has already sparked a flurry of reaction and he isn’t even in office yet, reports Asia Times. During his confirmation hearing before the US Senate Foreign Relations Committee, Tillerson said China’s occupation and militarization of the islands in the South China Sea was akin to “Russia taking Crimea from Ukraine.” On Friday, China state-run newspaper Global Times called the comments “astonishing” and a threat of war in an editorial. It also said that if the US blocks China’s access to those islands, then “the two sides had better prepare for a military clash.”

Tillerson’s comments appeared to spark an immediate reaction in the Taiwan dollar, with the market pricing in an increase in risk as seen in the divergence of implied volatility – or the projected variance in future prices – and the current or observed volatility (see chart). Taiwan-dollar-volatility-03 Oddly, while the fiery rhetoric and pulpit thumping on the South China Sea rattled investors, they seemed unfazed by the growing chatter about a possible military strike against North Korean nuclear facilities. South Korea’s government squeezed off a US$1 billion sale of 10-year bonds at a lower yield than the guidance given by the sale’s arrangers thanks to strong demand from investors.

The Catholic Church is wary of criticizing Philippine President Rodrigo Duterte’s controversial war on drugs that has seen the death toll rise to 6,000, writes David Hutt. The Philippines is one of the most Catholic countries in the world, but Duterte has arguably given the church hierarchy pause for thought, witnessed in its tepid opposition to his state-sponsored killing spree prosecuted in the name of law and order.

China’s trade picture is looking gloomy as the national customs agency released data showing the biggest drop in exports last year since 2009, a downtrend that may continue based on World Bank forecasts and the potential for trade friction with the US, Benny Kung reports. And Reuters reports that a customs agency official says China will be the biggest loser if US president-elect Donald trump imposes greater trade protectionist measures.