- Auch im April entwickelten sich die globalen Emerging Markets trotz der Verlangsamung der US-Konjunktur und der Euro-Krise gut.
- Die Börsen im mittleren Osten und Nordafrika (MENA) haben sich trotz der politischen Unruhen gut behauptet.
- Die Inflation stellt für viele Zentralbanken der Emerging Markets ein Problem dar und einige haben bereits die Zinsen erhöht.
- Die Währungen in den Zentral und -Osteuropäischen Ländern haben sich im letzten Monat gut entwickelt.
- Export, Wachstum und Unternehmensgewinne steigen derzeit in der Region Asien-Pazifik.
- In China hat die People´s Bank of China die Kreditvergabe von Banken and Nicht-Banken eingeschränkt. Offizielle Studien belegen, dass die restriktive Geldpolitik der chinesischen Zentralbank Auswirkungen auf die Wirtschaft zeigen.
Review of Emerging MarketsApril 2011, with focus on the Asia-Pacific
Highlights of the month
- Collectively, emerging markets performed well during April. This was in spite of signs that the US economy is slowing, at a time that the financial problems of particular ‘peripheral’ Euro area countries remain unresolved
- Once more, the stock markets of the Middle East and North Africa (MENA) were fairly resilient. This was despite ongoing unrest across the region
- Inflation remains a challenge for many emerging markets central banks. Policy makers in several countries moved to raise official rates
- The currencies of selected countries in Central and Eastern Europe performed well as investors focused on the strength of exports to Germany and other ‘core’ European countries
- Exports, economic activity and corporate profits continue to grow strongly across the Asia-Pacific region
- Once again, the People’s Bank of China moved to restrict lending by banks to non-bank customers. Official statistics are providing early signs that the central bank’s tightening of monetary policy is having an impact on the economy
Statistical summary
Global emerging markets in April
April was a positive month for emerging markets equities and bonds. This was because investors chose to focus on the strengths and advantages of the various major regions, rather than the challenges posed by the slowing of the US economy, the financial problems of particular ‘peripheral’ Euro area countries, and the disruption to Japan’s economy caused by the March earthquake.
In Brazil, the central bank continues to deal with the policy implications of surging exports (thanks to the strength of commodity prices), the potential for destabilising inflows of ‘hot’ money and mounting inflationary pressures. At its meeting in April, the monetary policy committee (COPOM) of Banco Central do Brasil (BCB) lifted the benchmark Selic rate by 0.25% to 12.00%. Inflation in Brazil had risen to 6.44% in the year to mid-April and is expected to rise above the top of the central bank’s target range (which is 4.50% plus or minus 2.00%). Some commentators were disappointed that COPOM did not raise the Selic rate by 0.50%.
At the end of April, Russia’s central bank surprised observers by lifting its key interest rate by 0.25% to 8.25%. Official statistics show that inflation increased from 9.5% in March to 9.6% in April. As is the case in other emerging markets – such as Thailand – the Russian government is keen to be seen to be in control of consumer prices in the run up to the next round of parliamentary and presidential elections.
Meanwhile, in mid-April, the Central Bank of the Republic of Turkey (CBRT) announced that Deputy Governor Erdem Basci would succeed Durmus Yilmaz as Governor. This was widely seen as a positive development that would result in continuity of policy. The CBRT has kept official interest rates low, but has been increasing the reserve requirement ratio (i.e. the percentage of deposits which commercial banks are not allowed to lend to non-bank customers). Shortly after the announcement of Mr Basci’s promotion, the CBRT lifted the ratio, for both Lira and foreign currency deposits, by a further 1.00%.
Returns from the stock markets of Central and Eastern Europe were driven by a number of factors. US dollar-based investors benefited from the particular strength of some of the currencies in the region – such as the Croatian Kuna, the Polish Zloty, the Romanian Lei and the Hungarian Forint. Fundamentals are improving and risk aversion falling, despite the well publicised financial problems of ‘peripheral’ Euro area countries such as Portugal and Greece. In the meantime, exports from many countries in Central and Eastern Europe have surged as a result of strong economic growth across Northern Europe.
The emerging markets of the Middle East and North Africa (MENA) were reasonably resilient, in spite of continued unrest in Yemen and Syria – as well as the ongoing conflict in Libya. The Institute of International Finance (IIF) issued a forecast that Egypt, Tunisia, Yemen and Syria will suffer recessions this year – mainly as a result of the political turmoil in those countries. Meanwhile, the International Monetary Fund (IMF) envisages that Saudi Arabia and other oil exporting countries will – paradoxically – benefit from the political unrest in other parts of the MENA region, which has caused a sharp increase in oil and energy prices. In a report released in late April, global consultancy PricewaterhouseCoopers noted that the political problems of the MENA region had caused a complete absence of Initial Public Offerings (IPOs) on regional exchanges in Q1 11: this compared with three IPOs in the preceding quarter, which had raised almost US$1bn.
Region in focus: Asia-Pacific
Even though the stock markets of China and India tracked sideways during April, the month was a rewarding one for investors in the Asia-Pacific emerging markets. In this regard, investors are taking the view that listed companies will be substantial beneficiaries of at least one of the following themes: growth in domestic demand; continuing expansion in intraregional trade, and/or; rising commodity prices. Prior to 2008, the fortunes of the emerging markets of the Asia-Pacific were typically seen as being linked to the health of the US economy and global trade. That the regional markets performed as well as they did in April – a month in which official statistics indicated that GDP growth in the USA is slowing and in which the US Federal Reserve announced that it had lowered its forecasts – suggests that the link is far less important than it used to be.
Most of the risks in the region relate to inflationary pressures, as well as over-extended real estate markets. In India, for example, headline inflation has jumped to 8.9%, above the 5-6% target range of the Reserve Bank of India. In early May, the central bank raised its key lending (repo) and borrowing (reverse repo) rates by a greater-than-expected 0.5%, to 7.25% and 6.25% respectively. This was the ninth increase in rates in a little over a year. The Reserve Bank of India also suggested that the government should lift the price of petrol so that it is (more) in line with global prices. Currently, the subsidies paid by the government to keep petrol prices down are exacerbating the budget deficit. Meanwhile, the manufacturing PMI for India, published by banking giant HSBC, increased to 58.0 in April, a marginal rise relative to March, when it had stood at 57.9.
In its China Quarterly update, which was published in April, the World Bank identified China’s real estate market as a ‘particular source of risk’ given the importance of the construction sector in the overall economy. For some months now, the authorities have been taking steps – with some success – to curb real estate speculation. More generally, inflation remains a concern and April saw China’s central bank lift its key policy interest rate and increase the reserve requirement ratio (i.e. the percentage of deposits that must be held by banks as cash, or passed on to the People’s Bank of China – and not lent to non-bank customers). As at the end of April, the ratio stands at 20.5% for large banks and 18.5% for smaller institutions.
Relating to other economies, China is well advanced in the tightening cycle and we expect inflation to become a less serious problem in coming months – not least because food prices have been boosted as a result of poor harvests last summer.
More crucially, we consider that Chinese stocks are attractively valued, at this stage, relative to their own history and relative to stocks in other markets. This says to us that there are opportunities from stocks which can sustain superior growth in earnings. Particular consumer-related and industrial companies should be able to grow their businesses virtually regardless of what happens to interest rates and inflation. Some companies are increasing capital expenditure: this means that their profitability should rise over the medium term. Others are spending heavily on advertising: as a result, they should be able to develop brands that give them pricing power (i.e. the ability to control prices and margins). In the telecommunications sector, a number of companies will be able to benefit from the spread of third generation (3G) services across China. Healthcare also appears to us to be a sector where the long-term growth potential is very good.
Elsewhere, the Bank of Thailand also increased its key policy rate during March. That central bank’s Monetary Policy Committee indicated that inflation is a problem, even though the headline rate stands at 3.14%. Measured inflation would be higher but for official price caps on staple commodities such as cooking oil and sugar, and subsidies on diesel. The latest statistics show that Thailand’s exports and imports rose, respectively, by 30.9% and 28.4% year-on-year in March: in both cases, the growth was considerably greater than had been expected.
In spite of the short-term policy challenges facing the government, we remain upbeat about the prospects for Thailand’s stock market. In the first instance, listed stocks should benefit from the likely further rise in energy prices over the medium-term: this matters, because the energy and petrochemicals sector accounts for around half of the total capitalisation of the stock market. In the second instance, as a leading producer of rice and other foodstuffs, Thailand’s economy should be boosted by any further gains in prices for agricultural commodities. Thirdly, the growth in exports of automotive products and electrical appliances over the last year or so indicates that Thailand is competitive as a manufacturing sector. Finally, the forthcoming election may produce a ‘feel good’ factor that boosts consumer sentiment.
Outside the ‘core’ stock markets of the Association of South East Asian Nations (ASEAN) countries (i.e. Thailand, Malaysia, Singapore, Indonesia and the Philippines), there are a number of ‘frontier’ markets which are evolving rapidly and which provide opportunities to disciplined investors. Vietnam is a case in point. The country continues to emerge as an attractive, low cost alternative to China for companies that are looking to diversify their manufacturing bases. We also like the long-term prospects of Sri-Lanka. Following the cessation of a 20-year civil war in 2009, economic reconstruction is underway and growth should continue to accelerate over the coming months.
