Barings Emerging Markets Facts and Figures

Baring stellt Ihnen mit dem Newsletter "Emerging Markets - facts and figures" (in englischer Sprache) einen monatlichen Überblick über die wichtigsten Ereignisse des vergangenen Monats in allen Emerging Markets zur Verfügung. In dieser Ausgabe liegt der Schwerpunkt auf Osteuropa und MENA. Barings | 08.09.2011 16:26 Uhr
Archiv-Beitrag: Dieser Artikel ist älter als ein Jahr.
Die Highlights:
  • Emerging Markets haben im August aufgrund der Anlegerängste über die globalen Wirtschaftsaussichten stark verloren.
  • In einigen Emerging Markets verschlechtern sich die wirtschaftlichen Bedingungen. In China bspw. deuten die neuesten Konjunkturaussichten auf ein "soft-landing" hin.
  • Die chinesische Regierung hat eine große Anzahl an Renminbi-denominierten Anleihen in Hongkong begeben, um dem Renmimbi eine größere Rolle im internationalen Handel und Investment zu geben.
  • Die brasilianische Zentralbank hat viele Beobachter durch eine Reduktion der Zinsrate um 50% überrascht.
  • Standard & Poor´s hat ihre Ratings für einige Emerging Markets Regierungen gelüftet - darunter Zentral- und Osteuropa.

Highlights of the month

  • Emerging markets equities sold-off sharply during August as investors became increasingly concerned over global growth prospects
  • There were, however, few signs that economic conditions are deteriorating dramatically in emerging markets. In China, for example, the latest data continues to indicate that the domestic economy is heading for a “soft landing”
  • The Chinese government undertook a large issue of ‘dim sum’ (Renminbi-denominated) bonds in Hong Kong and announced measures that will promote greater use of the currency in international trade and investment
  • Brazil’s central bank surprised many observers with a 50 basis point reduction in the key Selic rate at the end of the month. This suggested that the central bank is more worried about the state of the global economy – and less about inflation – than it has been in the past
  • India’s PMI fell for the third month in a row in July. However, the data indicates that the economy is still expanding and the export sector remains buoyant, rising by 46.5% in June compared to 12 months previous
  • Ratings agency Standard & Poors lifted its ratings or outlook for several emerging markets governments – in Central and Eastern Europe and elsewhere

Global emerging markets in August

Emerging markets were unable to escape the wave of investor risk aversion that swept the world during August. Investors were discomfited by data that pointed to a softening in economic activity in the USA and Europe. They were also concerned about the possible re-emergence of a debt crisis in the ‘peripheral’ countries of the European Union, despite the fact that the European Central Bank (ECB) embarked on a large scale program of buying euro area government bonds.

For the most part, though, the evidence suggested that the positive trends that have prevailed in the economies and financial markets of emerging markets remain intact. Towards the end of the month, for instance, ratings agency Standard & Poors (S&P) lifted ratings or outlooks for a number of countries. The outlook for local currency Brazilian government bonds, for instance, was raised from ‘stable’ to ‘positive’. S&P also increased the long-term foreign currency rating for Czech government bonds from A to AA1, noting the government’s low level of indebtedness and ‘prudently managed and balanced’ economy as major factors. S&P also raised the outlook for Slovakia’s government bonds from ‘stable’ to ‘positive’ following the government’s austerity drive.

Much of the data released in China in the middle of the month continued to indicate that the domestic economy is heading towards a “soft landing” – an orderly decline in inflationary pressures that is not accompanied by a sharp rise in unemployment. For example, the Conference Board’s leading indicator for China rose by 1.0% in June, having advanced by 0.6% in May and by 0.3% in April. The Ministry of Commerce reported that inward foreign direct investment (FDI) increased by 19.8% to US$8.3bn in July, compared to the same period 12 months previous.

The visit to Hong Kong by Chinese Vice-Premier Li Keqiang – who is widely expected to become Premier next year – was accompanied by a number of developments, the general theme of which was the growing importance of the renminbi as an international currency. The Ministry of Commerce issued new guidelines which will enable foreign companies to make FDI investments into China that are denominated in that currency. Mr Li himself confirmed that a new program will facilitate the recycling of deposits that are held in renminbi with Hong Kong banks into the financial markets of mainland China. For its part, the People’s Bank of China said that it intends to expand a trial program, which permits the settlement of international trade transactions in renminbi, from a limited number of cities to the entire country. These developments reinforce the importance of Hong Kong as the gateway for capital flows between mainland China and the rest of the world. Mr Li’s visit to Hong Kong coincided with a hugely successful issue of ‘dim sum’ bonds (renminbi-denominated securities sold and traded in the Special Administrative Region) by the Chinese government, which raised Rmb20bn (US$3.1bn) from institutional and retail investors. This was the largest ever ‘dim sum’ bond issue to have taken place.

Meanwhile, conditions also remain reasonably benign for India. The purchasing managers’ index (PMI) for that country that is calculated by HSBC slipped for the third consecutive month, from 55.3 in June to 53.6 in July. This indicates that the economy is still expanding in a healthy fashion, but that the efforts taken by the Reserve Bank of India to contain inflationary pressures are having an impact. India’s latest trade figures showed that exports in June were US$29.2bn, or 46.5% higher than a year before: for imports, the corresponding numbers were US$36.9bn and 42%.

At the very end of the month, the monetary policy committee (COPOM) of Brazil’s central bank surprised many observers by announcing a 50 basis point cut in the key interest rate (Selic) to 12.00%. This represented a major reversal in policy, because COPOM had lifted the Selic by 175 basis points over five consecutive meetings this year. In essence, COPOM is indicating that, for the time being, it is more concerned about the possible impact on Brazil of a global economic slowdown than mounting inflationary pressures. The latest data showed that, at 7.1% in August, annual inflation is above the 6.5% upper limit of the central bank’s target band.

Separately, Brazil’s Finance Minister Guido Mantega indicated that the authorities will take further steps to prevent the country’s currency, the real, from appreciating. Over the recent past, the real has been particularly strong – in part because of the positive performance of Brazil’s economy and in part because of interest rates that are among the highest in the world. This announcement coincided with gains by other Latin American currencies relative to the US dollar.

Region in focus: Eastern Europe and Middle East and North Africa (MENA)

Over the last year, the stock markets of the Middle East and North Africa (MENA) region have retreated, despite ongoing political unrest in selected regional economies; the fall is only of single-digits. Interestingly, the general risk aversion of global markets in the last month has had little impact. Meanwhile, the stock markets of Russia and other countries of Central & Eastern Europe have still posted double-digit year-on-year gains.

These outcomes highlight a key aspect of both regions – MENA and Central and Eastern Europe – about which we have written at length over recent months: in both cases, there are positive and secular changes that have the potential to produce favourable outcomes for investors over the medium-to-long term. In both cases, these changes are often more important than the short-term volatility in global markets.

In Russia, for instance, the high commodity price environment continues to support the fiscal position of the Russian government, meaning that there is significant scope for the government to lift spending in order to boost growth –an important issue given the approaching elections. We are looking for higher spending on social security and infrastructure: the beneficiaries should include a broad range of economic sectors that are well represented on the Russian stockmarket. Such sectors include banks, real estate developers and construction companies. Inflation has been elevated – 9% in July – but is not so high that the central bank has had to act aggressively to tighten monetary policy.

In both Russia and Turkey, we are able to identify a number of stocks that appear to us to be trading on attractive valuations. Through our positions in Russian banks, we are able to exploit the likely strong expansion in lending to the non-bank public, and a reduction in non-performing loans. We also believe that there are particular companies that will benefit from FIFA’s recent award to Russia (and Ukraine) of the right to host the 2018 World Cup. The government has allocated US$10bn for spending on new infrastructure: Prime Minister Vladimir Putin has also indicated that the private sector is expected to make a significant contribution. There is also a possibility that the arrival in Russia of the World Cup provides an impetus for the country’s business and government leaders to make a dramatic improvement to corporate governance standards: this is a wildcard, and a positive one.

There also remains the potential for structural reform and growth in Turkey. This is in part because the government has done less than other large emerging markets to promote productivity gains. It is also because the demographics of Turkey are such that – as is the case in much of the MENA region – there is scope for a steady lift in consumption spending over the medium-to-long term. One legacy of past financial crises in Turkey is that households do not carry much debt on their balance sheets. That means that they have the capacity to borrow in order to consume.

We believe that short-term political risk in some countries of the MENA region has overshadowed the long-term potential for the region as a whole. Massive infrastructure spending, the high prices for oil and gas, and official measures to encourage economic diversification in many of the Gulf Cooperation Council (GCC) countries provide opportunities. We continue to focus on stocks that, we believe, have the potential to capture future growth. Our MENA regional portfolios are exposed mainly to six countries – Qatar, the UAE, Turkey, Egypt, Saudi Arabia and Kuwait. There is also the possibility that a new administration in Egypt liberalises the economy in order to encourage job creation: this is important, as unemployment was a key factor in the unrest that took place in Cairo and elsewhere earlier this year.

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