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Posts tagged 'Emerging Markets'
This guest post is from Larry Brainard, Chief Economist and Co-Founder of Trusted Sources, an independent advisory firm specialising in emerging market macroeconomic and policy research.
The continuing debate about the timing of Fed tapering has overshadowed two developing issues that have important implications for EMs in 2014. The first is the reappearance of deflation in the Eurozone and the other is the suggestion by former Treasury Secretary Larry Summers that the US economy is slipping into secular stagnation. Read more
One-year total return of the Athens stock index, to the end of October 2013: +50%
One-year return of the Bloomberg Greece Sovereign Bond Index, same period: +134%
One-year net return of Dromeus Capital’s Greek Advantage Fund: +107%
Yep — FT Alphaville hears that the first-year performance of Dromeus Capital’s Greece-focused fund would make it one of 2013′s best-performing, having already made a strong start at the beginning of the year.
It’s another indicator of how much both Greek equities, and the sovereign’s restructured debt, have recovered this year… Read more
This vision of 2014 caught our eye — from Nomura’s annual outlook (out Monday)… Read more
A common criticism of the secular stagnation and post-scarcity theory is that it is contradicted by the fact that unacceptable levels of poverty exist in many places around the world, and in particular the developing world.
If there’s so much growth potential out there, how is it possible that the economy is in secular stagnation? Or so, at least, the argument goes.
But perhaps the question we should be asking is what continues to frighten investment capital away? Read more
We had allowed the World Bank’s annual ranking of, well, everyone by the ease of which their country facilitates business to pass unremarked. Singapore retained its top spot for the sixth year in a row, under criteria that clearly take no account of chewing gum preferences.
However, Maquarie have dug a little deeper into the survey results, and they find that the Philippines is on the up and up, while warning lights are flashing in China which slid to 96th globally, from 78th four years ago. Read more
Abundant flows of global capital in search of fresh yield are unstoppable but unabsorbable.
The imposition of new capital controls is often appropriate but, nearly as often, ineffectual. Read more
Okay, don’t just think ‘Oh, Goldman are trying to wring a few last drops of revenue from the EM story…”
Instead, click to enlarge. Read more
BNP Paribas has an interesting note out on the increased use of FX swaps by central banks.
If you’re a central bank in emerging markets, struggling to keep your economy stimulated/protected from hot money flows, using swaps or FX sales is a tempting and viable alternative to interest rate hikes, they note.
And generally speaking, the BNP EM strategists argue, swaps provide for a richer toolset for most central banks. Read more
Creaking where, actually?
Here’s a useful exercise from BAML on Thursday — at least if you can assume Indonesia’s the emblematic economy for everything that’s made emerging markets look so ugly this summer. Read more
That’s the Jakarta Composite down more than 5.5 per cent at pixel time on Monday, anyway.
Here’s a chart that caught our eye on Wednesday morning (click to enlarge):
It comes via George Saravelos at Deutsche Bank and shows the surge in short-term flows. Read more
Today, the combined market capitalization of Wells Fargo and JP Morgan ($440bn) exceeds that of every Energy and Materials company in Brazil, Russia, India and China ($420bn). Less than three years ago, those two banks were valued at less than half the market cap of the BRIC commodity sectors, indicating how quickly market leadership has rotated away from China to the US real estate story.
That’s from BofAML Michael Hartnett’s latest Thundering Word which runs through the bull and bear case for EM. A taste Read more
That’s the Turkish two-year yield rising above the 10-year earlier on Wednesday — chart via Reuters:
The level of debate for a lot of money in emerging markets on Thursday must have been whether or not to hide under the desk with a bottle of bourbon. So, kudos to Olgay Buyukkayali and Tony Volpon, top EM strategists at Nomura, for standing back and raising the tone a little…
The bank’s published a debate between the two about the sell-off. Tony’s vaguely bearish and Olgay’s vaguely bullish. But that doesn’t do justice to what’s quite a nuanced debate on EM: Read more
As we noted, it represents the market’s reconnection with disinflationary reality. The smoke and mirrors are fading. What is worrying, however, is that a move of this size has been prompted by simple talk of tapering. If that’s what tapering does, what will the first hint of a proper QE exit inspire?
As a result, it’s unlikely that an outright QE exit is viable at this stage. The deflationary consequences (which include the chances of a major market-sell off) would arguably be too large. Given that let’s analyse what the move in real yields really signifies. Read more
By now, everyone knows Tuesday was a big day for the EM bond market. But has the market really taken stock of how ‘bad’ things are?
Bloomberg reports on Thursday that this is probably the biggest drop in creditworthiness for emerging-market borrowers since the credit crisis started. Worse still, it is deepening. This they say is because speculation is intensifying (no-doubt among the buy-side) that central banks will scale back record stimulus**. Read more
FT Alphaville participated in a “Gold Bulls vs Bears” event hosted by the Association of Mining Analysts (AMA) on Wednesday.
The motion being discussed was:
Is gold’s role as a safe haven asset in the global financial system outdated and redundant and if the ubiquitous QE programs have been successful and the global economic upturn is confirmed, the price of gold will continue to struggle?
There may be signs that the wealthiest few zillionaires in emerging markets are outgrowing their love of bling or at least becoming more discerning.
But the fashion houses in Milan and Paris are unlikely to be losing sleep over that. Because for many millions in the EM, success and status remains all too bound up with having Chanel’s double-Cs on their handbag or an Ω on their wrist. Read more
Since last week’s US Appeals Court ruling went against Argentina, there’s been a lot of comment about how the country could try changing the trustee or payments structure of the bonds which came out of its 2005-2010 restructuring. Read more
Capital Economics ponders whether falling commodities prices will harm the emerging economies that rely most on selling them, and comes up with an answer: not much. At least, for most of them… Read more
From Standard Chartered:
Local-currency emerging bond markets have seen ever greater levels of foreign demand as global investors flee from the ongoing European sovereign crisis and continue to allocate to fixed income securities. From less that USD 150bn in March 2009, foreign holdings of local-currency government bonds in emerging markets (EM) are now well above USD 500bn.
Bubble? Read more