- Auch im Februar entwickelten sich die Emerging Markets sehr gut.
- Die Anleger wurden durch gute Fundamentaldaten, besonders aus den USA, ermutigt.
- Mehrere Verbraucherindizes aus den Ländern der Emerging Markets zeigen an, dass das Wachstum robust bleibt mit einem moderaten Inflationsdruck.
- Einige Zentralbanken der Emerging Markets, inklusive China und Indonesien, haben wachstumsorientierte Maßnahmen während des vergangenen Monats ergriffen.
- Von Seiten der chinesischen Regierung kamen Anzeichen, die darauf hindeuten, dass die Kapitalmärkte geöffnet werden sollen, potentiell um ausländischen Investoren besseren Zugang zum chinesischen Kapitalmarkt zu geben.
- In Brasilien unternahm die Zentralbank Schritte um der Stärke des Real zu kontern.
Highlights of the month
- Emerging markets equities continued to perform well in February.
- Investors were encouraged by favourable economic data releases, most notably in the US.
- Various Purchasing Managers’ Indices (PMIs) for emerging markets countries also indicated that growth remains reasonably robust, with moderating inflationary pressures.
- Several emerging markets central banks, including those in China and Indonesia, implemented progrowth policies during the month.
- The Chinese authorities indicated that they may be moving towards opening the country’s capital markets potentially giving foreign investors better access to Chinese equities and bonds.
- In Brazil, the authorities took steps to counter the strength of the real. The government also announced spending cuts, the aim of which is to lower interest rates further.
Global emerging markets in February
Emerging markets continued to perform well in February as investor appetite for risk assets improved. This was partly due to a continuing stream of favourable economic data from the US and encouraging signs from other major economies such as Germany. Investors’ attitudes were also boosted by the policy moves of several major central banks. Over the course of February, for instance, the Bank of England and the Bank of Japan announced enlargements of their asset purchase programmes, while the European Central Bank (ECB) lent €530bn to around 800 banks in the second-round of its longterm refinancing operation (LTRO).
Central banks in emerging markets also announced changes to monetary policy during the month. The People’s Bank of China announced that the reserve requirement ratio (RRR - the percentage of deposits that commercial banks are not permitted to on-lend to the non-bank public) would be cut by 50 basis points (from 21.0% to 20.5% for most of the country’s banks). The implication of this is that the authorities in Beijing are concerned about a potential slowing of economic activity. However, they are also alert to the fact that their previous major easing of policy – in 2009 – resulted in a bubble in real estate prices, which has only recently been bought under control.
Towards the end of the month, Sheng Songcheng, the head of the statistics department of the People’s Bank of China, indicated that official policy in that country may be moving in favour of opening China’s capital account in three phases, each of which would take several years. The first would involve outward investment by Chinese companies, given their desire to expand globally and the low valuation of assets outside the country. The second phase would involve foreign lending in renminbi. Finally, foreigners would have far greater ability to invest in China’s domestic markets for stocks, bonds and real estate. Given that there will be a change to China’s leadership later this year, it remains to be seen whether these ideas will be put into practice.
A number of observers were surprised by the decision of the Board of Governors in Bank Indonesia to cut interest rates by 0.25% to 5.75%. The Board recognises the challenges posed by the fragility of the global economy, but it is still looking for Indonesia’s economy to expand by over 6%. The Board noted that ‘the source of growth is mainly from domestic demand, supported by strong private consumption and investment. Strong private consumption is supported by improving purchasing power and consumer confidence, as inflation is under control.
More generally, the latest data continues to point to economic growth that is reasonably robust in most emerging markets, even if it is slowing in some cases. HSBC’s Purchasing Managers’ Index (PMI) for India, which measures the overall health of manufacturing in that country, slipped marginally from 57.5 (an eight-month high) in January to 56.6 in February (a reading of more than 50 represents an expansion in activity). HSBC noted that higher output inflation, apparently the result of attempts by manufacturers ‘to pass on higher costs’, reduced the likelihood that the Reserve Bank of India (RBI) would cut interest rates at its monetary policy meeting in March. Official statistics released in late February showed that India’s GDP growth slowed slightly from 6.9% in the September 2011 quarter to 6.1%.
In China, HSBC’s latest PMI indicates that manufacturing output in China, which had been contracting, is now almost stable. The PMI rose from 48.8 in January to 49.6 in February. Hongbin Qu, HSBC’s Chief Economist for China, noted that ‘deteriorating external demand is adding more downside risks to growth in the absence of a strong comeback in domestic demand.’ He noted that the People’s Bank of China could accelerate the pace of rate cuts as inflationary pressures recede. Meanwhile, HSBC’s PMI for Taiwan suggests that manufacturing activity there is growing for the first time since May 2011.
In Brazil, the manufacturing sector continues to benefit from growth in both output and new orders, with the rate of job creation the highest since March last year. In mid-February, the Planning Ministry said that US$32bn will be cut from this year’s budget, mainly from spending on defence and healthcare. According to Finance Minister Guido Mantega, the reduction in expenditure will enable the government to achieve a primary (i.e. before interest payments) budget surplus of 140bn reais, yet without lowering public sector investment. This outcome should allow interest rates to fall. At the end of the month, the government announced new measures to curtail appreciation of the real. In particular, the 6% financial services tax that had applied to foreign currency borrowings by Brazilian entities, for tenors up to two years, will now apply to all overseas borrowings for tenors up to three years. This is at a time that the central bank has been intervening in foreign exchange markets. Reports indicate that the extension of the tax is unlikely to have a significant impact, as most Brazilian bonds sold overseas have tenors that exceed three years.
Region in focus: Central & Eastern Europe and the Middle East & North Africa
As the figures on the front page of this report indicate, the equity markets of Central & Eastern Europe (8.52%) and the Middle East & North Africa (MENA) (4.82%) registered positive returns in February. The gains in these markets coincided with important developments in relation to the financial crisis in Greece and further rises in the price of oil.
While ongoing negotiations between Greece and the ‘troika’ (the International Monetary Fund, the European Central Bank (ECB) and the European Union) dominated headlines, investors were comforted by the establishment of the European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM), as well by the aggressive moves of the ECB to boost liquidity that is available to banks throughout the euro area. Consequently, the performance of financial markets reflected the general expectation that the problems of Greece will remain largely confined to that country.
In the third week of February, the oil price rose to a nine-month high. The catalyst for this was the announcement by the government of Iran that it had halted exports of crude oil to France and the UK. This move pre-empted the imposition by the European Union of an embargo on Iranian oil, which is due to take place from the beginning of June. The implications are that geopolitical risk, in the MENA region and globally, is likely to increase. However, the likelihood that the price of oil will remain well supported is good news for energy-producing countries across MENA and Eastern Europe.
The economic data from the major economies of Central & Eastern Europe and the MENA region published over the last month has been mixed, but far from disastrous. In Russia, for instance, the latest indicators point to muted growth in manufacturing activity, with output, new orders and jobs growing slowly. However, encouraging signs are emerging that inflationary pressure is falling. In Poland, too, activity is moderating at a time of moderating inflation pressures. In Turkey, manufacturing output has been hampered by adverse weather conditions during February. However, employment continues to grow – indicating that many Turkish businesses are optimistic about the long-term outlook for the economy.
Elsewhere, Statistics South Africa reported that inflation in that country rose from 6.1% in December to 6.3% in January. This means that inflation in South Africa has exceeded the Reserve Bank’s 3-6% target range for a third consecutive month. As a result, the central bank appears to have limited scope to reduce interest rates from the current level of 5.5%.
