Answer: Australia. Question (courtesy of Dylan Grice): "What do you call a credit bubble built on a commodity bull market built on a much bigger Chinese credit bubble?" The country has 5 of the world's most 15 expensive cities, runs a current account deficit despite booming commodity sales to China, and has seen a steep rise in debt/income. Shares: EWA +10.9% YTD, the aussie: FXA +1.1% YTD.
Also weighing on Oz, Westpac (WBK) and ANZ (ANZBY.PK) both hike mortgage rates even with the RBA in the midst of an easing cycle. Australian banks are unusually dependent on overseas funding markets, and find their margins being squeezed. "The RBA's cash rate alone in not an accurate reflection of bank funding costs," says ANZ. (previous)