Posts Tagged: emerging markets

African Countries -New BRICS

20 August 2014 - 11:34 am
 

The emerging market slowdown is affecting some countries worse than others, with comparatively resilient growth in African and the Middle East now attracting serious attention from the financial salesmen whose job it is to keep the investment dollars flowing.

Brazil and Russia’s growth has been especially sluggish since emerging markets boomed in 2004-2008, according to data supplied by London research consultancy Capital Economics.

And while emerging Asia remains the fastest growing developing region, “growth has held up best in in the Middle East and Africa,” Capital Economics economist Daniel Martin finds.

That will be music to the ears of those bankers and consultants who are currently fishing out old China research notes from 2006, substituting the word “Africa” throughout.

Africa is the next frontier for emerging market investors, according to some analysts, because the development of the middle class is expected to lift off.

>> Read More

Is the BRICS rise over?

27 July 2014 - 11:49 am
 

On one level, this seems like a rather odd time to be asking such a question, especially when the BRICS political leaders have just agreed to set up a joint development bank to be headquartered in Shanghai. So the BRICS name is certainly here to stay, and in terms of global governance, their influence is likely to rise as a group because of this development.   Previously, the BRICS political leaders meetings had failed to agree anything specific and even once the creation of such a bank was first mooted, for the past two years, they appeared to have difficulties in agreeing where it might be located and how it should be capitalised. At this Fontaleza meeting in Brazil, they have confounded sceptics by agreeing not only both these key things, but also to have the first head of the Bank to be an Indian. What the Bank will prioritise in terms of lending and projects, we will have to wait and see, but one can think of many good ideas including shared road and rail infrastructure challenges, especially those with some common borders, projects for energy efficiency, alternative energies, clean and safe water, and of great importance to themselves, to focus on the growing resistance to antibiotics, a challenge that if a solution cannot be found will be very harmful for their futures. But if the BRICS leaders hadn’t made this breakthrough, I am sure the siren rising about the end of the BRIC economic phenomena would be even louder and it is important to try and objectively deal with this, separately from this announcement, important as that is. >> Read More

 

The PBOC has just signed a deal with the BRICS nations on a $100bn Contingent Reserve Arrangement. After finalising the deal they said it was in the best interests of China and the world to help other emerging economies. They also said that it’s is hard for China to be the exception if there is huge volatility in global financial markets.

China’s reach now goes further with this deal. It’s effectively an emergency swap agreement program like the Fed, BOJ, BOE and ECB have agreed for their respective currencies.

The breakdown is as follows;

  • China – USD 41 billion
  • Brazil – USD 18 billion
  • Russia – USD 18 billion
  • India – USD 18 billion
  • South Africa – USD 5 billion

It will be interesting to hear if Russia ever needs to access the swap lines if sanctions bite deeply.

 

MSCI has chosen not to press ahead with a controversial plan to add mainland Chinese equities to its global benchmark indices, while South Korea and Taiwan will no longer be considered for a developed markets ranking.

As part of its annual review, MSCI, an index provider, said it would still consider including China’s so-called A shares in its 2015 review. MSCI Korea and MSCI Taiwan indexes were removed from potential reclassification based on a lack of significant improvements over the past few years in key areas that affect accessibility in those markets.

The prospect of including mainland Chinese equities in global benchmarks would be a major milestone in the opening up of China’s financial markets. More than 200 stocks listed in Shanghai and Shenzhen – known as A shares – would be added to the MSCI China index, which is made up only of mainland companies listed in Hong Kong and New York.

As a result, A shares would also be included in MSCI’s Asia ex-Japan and global emerging markets indices. Taken together, the three benchmarks tracked $3.4tn in funds across the world. >> Read More

 

Mark Mobius, Templeton Emerging Markets Group Executive Chairman sits down with WSJ Editor in Chief Gerard Baker to discuss the current geopolitical landscape and his investment outlook for emerging economies including Nigeria, Ukraine, Russia, Brazil, India and China.

 

So-called “frontier markets” are the hot new investment theme as investors search for new opportunities outside the more mainstream developing countries.

But as Min Zhu of the International Monetary Fund has pointed out in a blog, they “combine huge potential with big risks”.

The potential is clear. These more exotic markets – such as Bolivia, Ghana, Honduras, Mongolia, Nigeria, Vietnam and Mozambique – are for the most part growing rapidly even as bigger emerging markets have hit a sticky patch. A chart below from the IMF shows just how well frontier markets are doing relative to developed and emerging ones.

Their economies have been helped by commodity exports, fundamental improvements in governance and policymaking, attractive demographics and better financial metrics after reducing debts significantly in recent years – some through the IMF and World Bank’s “Highly Indebted Poor Country Initiative”.

Many have also been buoyed by capital inflows as investors search for new, lucrative investment opportunities, as Mr Zhu – deputy managing director of the IMF – points out:

Low interest rates combined with advanced economies shedding debt have pushed investors to search for higher returns on their investments, which has expanded their interest to invest >> Read More

 

Advanced economies and emerging markets are assuming unexpected roles, with the former leading the recovery in the global economy while the latter weighs on global growth, at least temporarily, says Moody’s Investors Service in a report published today.

 The report, entitled ” Global Macro Outlook 2014-15: Role Reversal, as Advanced Economies Emerge as Engine of Recovery”, is available on www.moodys.com. The Global Macro Outlook underpins Moody’s universe of ratings, providing a consistent benchmark for analysts and investors. This report is an update to the February 2014 Global Macro Outlook report. It reviews key recent developments, provides an update on Moody’s central forecasts for 2014-15, and discusses the key risks around its forecasts.

 Moody’s notes that reforms and accommodative monetary policy in the aftermath of the global financial and the euro area crises are slowly bearing fruit in advanced economies. After a soft patch at the start of the year, US economic activity is set to pick up during 2014 on the back of strong corporate balance sheets, favourable financing conditions, a smaller fiscal drag and strong price competitiveness. Moreover, after two years of recession, the euro area will contribute positively to global growth in 2014 as exporters benefit from competitiveness-improving reforms and as constraints on households’ budgets ease. >> Read More

 

India slid down to 83rd spot among 148 economies in terms of leveraging information and communications technologies (ICT) for growth and well being, says a World Economic Forum report.

In 2013, it ranked 68th out of 144 countries.

According to the 13th edition of the Global Information Technology Report 2014, little progress has been made in bridging the gap between the world’s most networked economies and the rest of the world.

Many large emerging economies continue to struggle to realise their full digital potential and feature lower down the index, while developed economies feature on the top.

Among emerging market economies, China was placed on the 62nd position, Brazil (69th), Mexico (79th) and India (83rd).

India is the least performing of the BRICS economies and the drop in rankings can be traced back mainly to difficulties in improving historical limitations and keeping up with other emerging economies in several dimensions. >> Read More

 

unilever-asrUnilever said that economic volatility and slowing demand in emerging markets would not fundamentally alter its strategy, as it reported sales growth that topped estimates for the start of the year.

The food and consumer goods giant, which has made a series of brand disposals in developed markets in recent months as it looks to refocus its portfolio, said on Thursday that it was now reviewing both its North America pasta sauces business and its Slim.Fast diet shake brand.

Across the group, underlying sales growth came in at 3.6 per cent for the first quarter, and a stronger 6.6 per cent in emerging markets, as revenues fell to €11.4bn, a 6 per cent drop largely blamed on unfavorable currency movements.

That topped analysts’ estimates, although it was down on the 4.1 per cent group growth seen in the fourth quarter.

Said Unilever’s chief executive Paul Polman: >> Read More

Akash Prakash: This rally is real

11 April 2014 - 7:02 am
 

The Indian equity markets are on a roll. The Nifty index is up about eight per cent in local currency and 11 per cent in dollar terms. India is the second best-performing market in Asia, after Indonesia, and one of the best emerging marketsoverall. We have received inflows of about $4 billion from foreign institutional investors (FIIs) in the first quarter of 2014, of which $2.5 billion have come in the last two weeks of the quarter. The indices are recording new highs on a daily basis, and, after a long time, India is once again a discussion point for global investors. While domestic investors have still not joined this rally, the continued redemptions that accompanied every market rise till now seem to have finally stopped. Therupee has also strengthened, and we have gone from being one of the “fragile five” to having the Reserve Bank of India (RBI) intervene in order to prevent rupee appreciation beyond 60.

Many are sceptical about this rally. They think the stock market is once again showing its casino-like characteristics. They make the point that the markets are getting ahead of themselves, and there is no certainty that Narendra Modi will become the next prime minister. Even if Mr Modi were to form the government, he does not have a magic wand with which to turn things around. How do you revive the private sector investment cycle when more than 50 per cent of the delays in approvals are at state level or have to do with land issues? How do you revive investment when the majority of India’s infrastructure developers are over-leveraged and have no access to equity? >> Read More

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Technically Yours,
Team ASR,
Baroda, India.