- Emerging Markets Märkte litten im September unter der Risikoaversion der Investoren, die weiterhin beunruhigt über die Eurokrise und die finanziellen Probleme Griechenlands sind.
- Der Brasilianische Real und einige andere Währungen gaben gegenüber dem US-Dollar nach.
- Innerhalb der Emerging Markets war MENA ein Outperformer.
- Der Internationale Währungsfonds gab in seinem Halbjahresausblick bekannt, dass die Emerging Markets in 2011 und 2012 nur geringfügig gegenüber 2010 nachgeben werden.
- Neue Statistiken, vor allem aus der Region Asien-Pazifik, deuten an, dass die Fundamentaldaten der Emerging Markets weiterhin robust bleiben. Auch der Inflationsdruck hat nachgelassen.
- Chinesische Immobilienwerte kamen unter Druck, weil bekannt wurde, dass die chinesische Regierung die Immobilienspekulation eindämmen will.
Highlights of the month
- Emerging markets sell off in September as a result of investor risk aversion. Investors continued to fret about the financial problems of Greece and other ‘peripheral’ Eurozone countries
- The Brazilian Real and other emerging markets currencies fall, relative to the US Dollar
- Within the emerging markets universe, the MENA region was a relative outperformer
- The International Monetary Fund (IMF) published its semi-annual World Economic Outlook, which suggested that the emerging markets’ economies, are likely to slow only a little in 2011 and 2012 relative to 2010
- Latest statistics, in particular the Asia-Pacific region, confirm that economic growth in emerging markets remains reasonably robust: inflationary pressures have also been decreasing
- Chinese property stocks came under renewed downward pressure as a result of reports that the authorities are taking steps to clamp down on real estate speculation
Global emerging markets in September
Like August, emerging markets were unable to escape the wave of risk aversion that swept the world in September. Investors continued to fret about the potential re-emergence of a debt crisis in the ‘peripheral’ countries of the Eurozone, and were unsettled by data that pointed to a slowing in economic activity in the US and Europe. As the table on the front page of this Review indicates some emerging markets equities suffered double-digit losses, in US Dollar terms. The main exception was the Middle East and North Africa (MENA) region. Stocks fared better because they had already fallen sharply earlier in the year as a result of political issues.
However, much of the newsflow that appeared during the month highlighted how most of the positive trends that have prevailed for some time in the economies and financial markets of the emerging markets remain intact.
In late September, the International Monetary Fund (IMF) published the latest edition of its World Economic Outlook. Much of the commentary in the mainstream media focused on the caution expressed in the Outlook in relation to the prospects for developed countries. The IMF has trimmed its GDP growth projections for the developed world to 1.6% for 2011 and 1.9% for 2012. Downside risks are seen as coming from a potential deterioration of the crisis in the Euro area and from a downturn in economic activity in the US.
However, much less attention was paid to the significantly more benign prospects for many of the world’s emerging markets. The Outlook indicates that the IMF is currently looking for the emerging markets, collectively, to achieve GDP growth of 6.4% this year and 6.1% in 2012. This represents a mild deceleration relative to 2010, when the emerging markets achieved economic growth of 7.3%.
The Outlook noted that Asia’s track record over the last three years has been good. ‘Growth remains strong, although it is moderating, with emerging capacity constraints and weaker external demand. Weaker activity in major advanced economies suggest that a pause in the policy tightening cycle may be warranted for some economies and underscore the importance of rebalancing growth toward domestic sources.’ The Outlook advocates a greater focus on domestic demand in regional economies ‘with persistent current account surpluses.’ The Outlook was also generally upbeat about the prospects for Latin America, Sub-Saharan Africa and most of the Middle East and North Africa, as well as Russia.
During the month, there were several signs that China’s economy is decelerating. HSBC’s ‘flash’ purchasing manager’s index (PMI), which seeks to indicate the likely direction of manufacturing activity, slipped from 49.9 in August to 49.4 in September. This means that the PMI has been around 50 – the level below which activity is likely to contract – for three consecutive months. However, HSBC itself notes that a reading as low as 48 would still be consistent with annual growth in industrial production of 12-13% and a rise in GDP of about 9%. Meanwhile, Chinese property stocks sold off sharply as a result of reports that the China Banking Regulatory Commission (CBRC) had ordered trust companies to stop lending to Greentown, the largest builder in Zhejiang, the wealthy province to the south of Shanghai. The CBRC’s move was seen as being the latest of a long line of official measures to curb speculation in the real estate market. Reports indicated that, major developers in Shanghai have been cutting sales prices for their residential projects. In Hong Kong, the real estate market has been cooling thanks in part to measures introduced by the government in June to limit further rises in prices that had been skyrocketing.
Many of the latest statistics, from the Asia-Pacific region in particular, point to continued growth and moderating inflationary pressures. The General Statistics Office of Vietnam, for instance, said that economic growth in the first nine months of 2011 was 5.76%, or a little less than the 6.54% of the previous corresponding period. The slowdown is the result of moves by the State Bank of Vietnam to tighten monetary policy in order to slow inflation. The central bank had lifted its key interest rate in nine steps, from 7% at the beginning of November 2010 to 15% in May this year: in July, the Bank reduced the key rate to 14%. Thailand’s Office of Industrial Economics said that industrial production in July was 7% higher than in the same month of 2010. Most commentators had been looking for growth of 4%. Thailand’s auto industry is benefiting from pent-up demand for new cars, both at home and overseas. Production of cars, as well as rubber products and hard-disk drives, has grown at double-digit rates over the last year. Earlier this month, the Commerce Ministry had said that Thailand’s exports should rise by about 20% in 2011.
In Singapore, official statistics showed that industrial production increased at a seasonally adjusted rate of 3.9% in the month of August (relative to July). Manufacturing activity is 21.7% higher than it was in August 2010 – thanks mainly to surging output of pharmaceuticals.
In Taiwan, the Central Bank of China (CBC) kept its key interest rate unchanged at 1.875%. Over the last year, the central bank had been tightening monetary policy. According to CBC Governor Perng Fai-nan, the decision to keep monetary policy unchanged reflected the slowing of the global economy and the diminution of inflationary pressures in Taiwan itself.
In Saudi Arabia, official statistics indicated that headline inflation had slipped from 4.9% in July to 4.8% in August. This was in spite of the latest jump in food prices which, according to the Food and Agriculture Organisation (FAO), had risen by 26% over the year to August. This suggests that the Saudi government is having considerable success in convincing retailers (and, presumably, food manufacturers) to limit price increases. The IMF, for its part, is looking for inflation in Saudi Arabla of about 6% this calendar year.
Region in focus: Latin America
As the figures in the table on the front page of this Review indicate, the emerging markets of Latin America were unable to escape the general sell-off that resulted from investor risk aversion at a time of mounting concerns over the financial problems of Greece and other ‘peripheral’ Eurozone countries. The latest weakness in share prices in the region obscures the advantages that are enjoyed by policymakers – and, indeed, businesses and consumers – relative to their counterparts in the developed world. The Latin American economies are, for the most part, near the top of their respective economic cycles. Until recently, the central banks of Brazil and some other countries were concerned about mounting inflation. They were, for the most part, increasing interest rates or, at least, discussing the possibility of doing so. However, the decision at the very end of August by COPOM, the monetary policy committee of the Brazilian central bank to cut the key interest rate (Selic) by 50 basis points to 12.00% represented a major reversal. In essence, COPOM was indicating that it is now less concerned about inflation in Brazil than about the possible impact of a global economic slowdown. Of course, unlike its counterparts in most developed countries, COPOM has plenty of scope to ease monetary policy.
In other words, falling interest rates will now be a key theme in the largest economy in Latin America. One result of this is that the Brazilian Real has fallen sharply relative to the US Dollar over the last month: this is ironic because Finance Minister Guido Mantega and, indeed, President Dilma Rousseff had indicated that the authorities would take steps to prevent what had previously been a strong currency from appreciating further.Political and economic cycles are also favourable in other countries across the region. We are encouraged by the general resilience of Mexico’s economy, for instance. According to INEGI, the national statistics office, economic activity in July was 3.74% higher than it had been a year before. Over the last year, activity has grown most rapidly in the agricultural sector, where INEGI’s indicator has advanced by 6.95% year-on-year. Given that the presidential election is due to be held in mid- 2012, it is quite possible that there will be an increase in spending on social services and infrastructure which would boost activity further in the coming months.
Political risk in Peru has been reduced following the resolution of the recent election, as a result of which Ollanta Humala has been confirmed as the next President. His new cabinet is politically diverse: perhaps more importantly, he has kept the president of Peru’s central bank in place. Peru’s economy is a major beneficiary of elevated prices for both base and precious metals.