Safe haven assets back in the spotlight

<p>Kia ora,</p><p>Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news the sudden Middle-East explosion is likely to put safe-haven assets back in the spotlight this week.</p><p>But first, China said its giant <a href="https://www.safe.gov.cn/safe/file/file/20230908/c8f9d7fc2689427bbbbddca88594af34.pdf?n=pdf" target="_blank"><strong>foreign exchange reserves</strong></a> were little-changed in August. They don't provide transparency of which currencies they hold them in, but we do get some of that from the <a href="https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/npr_history.html" target="_blank"><strong>US data</strong></a> which shows Chinese holdings of US debt is about US$800 bln (25% of the Chinese holdings) and falling. That means the Chinese hold about US$2.4 tln of other country debt. Many will be rogue nations. The Chinese fx reserves now have high risk attached to them, and will become an increasing problem for them (not to mention the debtors).</p><p>Hong Kong and southern China are bracing under <a href="https://www.weather.gov.hk/en/wxinfo/currwx/tc_gis.htm" target="_blank"><strong>Typhoon Koinu</strong></a>. Their stock market will be among many institutions not opening this morning, perhaps all day.</p><p>In India, their central bank kept its key policy rate unchanged at 6.5% as expected on Friday but <a href="https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=56501" target="_blank"><strong>said</strong></a> it would keep liquidity tight using bond sales to bring inflation closer to its 4% target and this focus on bond selling was not expected. Indian CPI inflation is currently running at 6.8%. It didn't release details of what it expected to sell, but is was suddenly active and that drove benchmark bond yields sharply higher, up 13 bps yesterday, the most since August last year, to clo