It’s been a tough day for EM. But just in case you were tempted to bundle the whole region together to make a sweeping generalisation about future performance, it’s worth reading through the following note from Capital Economics on Friday.
As they explain, EM is no longer the place it used to be. There are clear divisions emerging, and understanding which countries influence into each other more directly than others matters now more than ever:
Market turbulence in Turkey, Ukraine and now Argentina has led to talk of a new crisis sweeping emerging markets (EMs). But the emerging world has become a far more diverse place over the past decade. The real lesson from recent events is that the need for investors to discriminate between individual EMs has never been greater.
That’s what this chart, released on Friday by Citi’s municipal bond team, apparently suggests:
In a whopping report out Monday, Citi’s Willem Buiter and Ebrahim Rahbari call time on ‘Emerging Markets’ and ‘BRIC’ labels.
And not a moment too soon, we reckon. Read more
Barclays Capital may not be too hot on some emerging-market credits (ahem, Hungary) but they certainly make a stirring case for EM bonds overall.
Or rather, they make a stirring case for the rise of emergification. Read more
While Europe’s sovereign debt crisis has grabbed the attention of global markets, inflation is again clawing its way back in emerging economies, as Philip Poole of HSBC notes on the FT’s Beyond Brics blog. China provided more evidence of this trend on Tuesday, with the release of CPI data for April which showed inflation continuing to move higher.
As the FT reported, both Chinese inflation and housing price rises continue to quicken, with consumer price inflation rising to 2.8 per cent in April from 2.4 per cent the month before – its highest in 18 months, although still short of the government’s 3 per cent target – while factory-gate inflation jumped to 6.8 per cent from 5.9 per cent. Read more
Alongside sterling’s weakness and a smattering of M&A, one of the reasons the UK has shown a clean pair of heels to its peers in Europe since the start of the year is its relative internationalisation.
By that, we mean the growing number of UK-listed companies which generate a large chunk of their income overseas, particularly in the fast-growing emerging markets of Asia and Latin America. Read more