Barings Emerging Markets Facts and Figures

Barings freut sich Ihnen mit dem Barings Newsletter "Emerging Markets - facts and figures" (in englischer Sprache) einen monatlichen Überblick über die wichtigsten Ereignisse des vergangenen Monats in allen Emerging Markets zu geben. In dieser Ausgabe liegt der Schwerpunkt auf Zentral- und Osteuropa und MENA. Barings | 13.12.2011 11:25 Uhr
Archiv-Beitrag: Dieser Artikel ist älter als ein Jahr.
Die Highlights:   
  • Die Emerging Markets waren wieder einmal von der Eurokrise überschattet.
  • In China, Brasilien und anderen Emerging Markets wurden die Zinsen gesenkt und weitere Maßnahmen zur Wachstumsförderung angekündigt.
  • Investoren haben jedoch recht positiv auf die konzertierte Aktion der sechs Notenbanken Anfang des Monats reagiert.
  • Die neuesten Statistiken aus China deuten auf moderates Wachstums und reduzierten Inflationsdruck hin.
  • Investoren haben auch relativ positiv auf die politischen Ereignisse in Ägypten reagiert, da die Wahlbeteiligung hoch und die Unruhen niedrig waren.

Highlights of the month

  • Emerging markets were once again overshadowed by the ongoing eurozone debt crisis
  • Policymakers in China, Brazil and several other emerging markets cut official interest rates and/or announced other measures to boost activity
  • Immediately after the end of the month, investors reacted very favourably to the concerted efforts by six major central banks to boost liquidity conditions worldwide
  • The latest statistics continued to point to moderating economic growth and easing inflationary pressures in China as manufacturing activity slowed
  • Investors reacted favourably to political developments in Egypt at the end of the month as elections saw a high turnout and a lack of unrest

Statistical summary

Global emerging markets in November

Emerging markets equities fell in November as the ongoing crisis in the eurozone continued to impact risk appetite. It is important to note, however, that emerging markets rose strongly immediately after the end of the month as major central banks agreed to co-ordinated actions to provide support to the global financial system. A joint statement from the banks said that the move was aimed to “ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

This announcement was not the only source of cheer as the People’s Bank of China also moved to reduce the reserve requirement ratio (RRR) that applies to commercial banks from 21.5% - a record-high level – to 21%. The RRR indicates the percentage of deposits with commercial banks that must be deposited with the central bank (or held as vault cash) and cannot therefore be lent on to non-bank customers. This potentially marks a very important change in policy direction by China as it has been raising the RRR for much of the last three years. Previously, the central bank had been using RRR increases to counter the impact of foreign currency inflows.

The People’s Bank of China’s decision is another sign that that the Chinese economy is heading towards a ‘soft landing’ – which involves slowing economic growth that is still very respectable by most  standards, coupled with falling inflationary pressures. The China Federation of Logistics & Purchasing said that its Purchasing Manager’s Index (PMI) fell from 50.4 in October to 49.0 in November: this implies that manufacturing activity in the country is contracting for the first time since early 2009.

Earlier in November, the Customs Bureau had reported that exports in October were 15.9% higher than they had been a year previously. By this measure, export growth is the slowest that it has been for two years – although it is still well into double digits. The trade surplus for October stood at US$17bn with imports 28.7% higher than they had been in October 2010. These results indicate how domestic demand remains considerably stronger in China than in most of the country’s major trading partners. Meanwhile, the National Bureau of Statistics (NBS) observed that consumer price index (CPI) inflation in October was 5.5%, the lowest for five months.

At the very end of November, the monetary policy committee (COPOM) of the central bank of Brazil announced a 50 basis point reduction in the key policy rate (Selic) to 11.0%. This means that COPOM has cut rates at each of its last three meetings. The committee indicated in its announcement that it considered that the rate cuts were appropriate given developments in the global economy, and did not threaten the achievement of the 2012 inflation target. Elsewhere, the Finance Ministry announced that it would abandon the so-called IOF tax on equity purchases by foreigners. The tax was introduced around two years ago in order to discourage inflows of ‘hot’ money from overseas that had caused the Brazilian real to rise sharply, with the result that it had adversely impacted exports. The government also announced cuts in taxes on home appliances and staple foods, in order to encourage consumer spending. Investors reacted very favourably to the changes to the IOF and the other tax cuts.

Elsewhere in emerging markets, the news was broadly positive. The Monetary Policy Committee of the Bank of Thailand voted in a majority decision at the end of November to cut the key policy rate by 0.25% to 3.25%. The Committee noted that the massive floods in and around Bangkok has had a negative impact on economic activity at a time that ‘the risk of a global economic slowdown has increased.’
 
A landmark bond issue during the month took place in Indonesia. The government successfully issued a US$1bn Sukuk (a bond that is structured so that it complies with Islamic principles). The bond matures in 2018, is denominated in US dollars and was sold at the equivalent of a 4% interest rate. When the government issued US$650m of five-year Sukuks in April 2009, the interest rate was 8.8%. The latest deal was, it appears, heavily oversubscribed and highlights not only the strong demand for Sukuks in South East Asia, but also robust appetite for bonds issued by the government of Indonesia, underpinned by the country’s strong economic performance in recent years.

Region in focus: Central & Eastern Europe and the Middle East & North Africa

Hungary’s bond market was volatile in November as ratings agencies Fitch and S&P lowered the outlook for the country’s sovereign rating to negative. Towards the end of November, Moody’s Investor Services lowered its rating of Hungarian government bonds to sub-investment grade. Investors were also unsettled by events in global financial markets and although there are a number of problems that are specific to Hungary – such as the high incidence of foreign currency mortgages (at a time that the forint has been under downwards pressure) – none of these are new. Further, the country enjoys a trade and current account surplus. For its part, the government has taken decisive measures to reduce the fiscal deficit and to lower its debt relative to overall GDP.

At the very end of November, the Hungarian National Bank increased its key policy rate by 50 basis points to 6.5% in a bid to ease inflationary pressures that had developed from the weakness of the forint. The government has also begun precautionary negotiations with the International Monetary Fund (IMF).

More generally, investors reacted very favourably on 1 December to the news that the US Federal Reserve and five other major central banks will cut the rate charged to other central banks for access to US dollars with a reciprocal agreement also established with regard to the domestic currencies of the other central banks.

In Russia, investors were also heartened by rises in commodity prices and by reports which indicated that energy giant Gazprom may set aside as much as 200bn roubles (US$6.5bn) for dividend payments.

At the very end of November, Poland’s General Statistics Office noted that the country’s economy had grown by 4.2% in the third quarter 2011 relative to the same timeframe 12 months previous. Over the period, growth had been driven mainly by domestic demand although net exports were also robust, contributing 1% to overall growth. The implication is that Poland’s economy has been largely unaffected by the financial problems in ‘peripheral’ eurozone countries.

In Egypt, equities rallied strongly towards the end of November as investors applauded the high turnout and general lack of unrest in the recent round of political elections. Earlier in the month, the Central Bank of Egypt (CBE) had announced an increase in interest rates. The CBE is concerned about lingering inflation pressures. Separately, the CBE had noted that overall economic growth slipped from 5.1% in the June 2010 fiscal year to 1.8% in the June 2011 fiscal year. Recent political developments had resulted in ‘significant declines in the tourism, manufacturing and construction sectors’.

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