Emerging Markets Cheat Sheet (May 30, 2011)

Sunday, May 29th, 2011

Emerging Markets Cheat Sheet (May 30, 2011)

Strengths

• First quarter results from Russian retailers surprised investors on the positive side, showing strong recovery in margins as they successfully passed on higher prices to customers while still enjoying acceleration in traffic growth.
• A power shortage in China has supported demand for thermal coal, as production during the January through April period rose 11 percent.
• The minister of China’s Ministry of Water and Irrigation said China will double its investment in water projects every year for the next five years.
• Mr. Sun Guoqing, director of the Ministry of Communication’s Comprehension Planning Department was quoted as saying that China plans to invest about 6.2 trillion Rmb on transportation infrastructure by the end of 2015.
• Ad agencies in China expect the country’s overall ad market will grow 10 percent this year and online is expected to grow 30 percent. They believe, as evidenced by the revenue growth of Baidu Inc., a Chinese web services company, that search advertising growth will be even stronger, and e-commerce, social media, and online video will be new growth drivers.
• Retail in China is seeing strong growth: Gome Electrical Appliances Holding Ltd. reported 66 percent sales growth in April, and Belle International reported same store growth of 22 percent for the first quarter and expected same growth pace for the second quarter.
• China’s Rmb strengthened to a 17-year high at 6.49 per U.S. Dollar at close of Friday. This will help reduce commodity import costs in oil and minerals.
• China plans to train 2,000 experts to conduct research on a new form of nuclear fusion for power generation called magnetic confinement fusion. This proves that China will continue its nuclear power policy and build more capacity once safety concerns are being addressed.

Weaknesses

- With the exception of Poland and the Czech Republic, credit growth rates in Eastern Europe have been flat or negative due to continued high unemployment rates, the banks’ impaired balance sheets and hefty bank levies imposed in Hungary.

• China Automotive Technology and Research Center suggested that China’s auto sales may fall 10 percent this year with the end of the government stimulus policies and restriction on car licenses.
• The drought in China may affect food prices in the short term and be a drag on industrial production. However, the previous drought has not slowed industrial growth.
• The Shanghai Interbank Offered Rate (SHIBOR) has almost tripled since November 2010 to 4.6 percent, clearly indicating a liquidity dry-up, according to Bloomberg data.

Opportunities

• The RGE Monitor reports that the eurozone debt jitters could facilitate a banking consolidation process in Eastern Europe, giving the healthier banks a larger market share. Some Western European banks directly affected by the eurozone debt crisis—including Allied Irish Banks and EFG Eurobank—have already sold their Polish subsidiaries to preserve capital for their core domestic operations.
• China high speed trains are connecting smaller cities and countryside with major cities and shortening travel time. Retail benefits from rural and small town travelers.

Threats

• Residential house sales are seeing a slowdown in major Chinese cities this year. With the tightening of lending to property developers and restriction of purchases by the governments in China, developers are forced to raise money by selling at lower prices.

Tags: Baidu, Chinese Web, Electrical Appliances, Growth Drivers, Growth Pace, Import Costs, Infrastructure, Magnetic Confinement Fusion, Mr Sun, Next Five Years, Nuclear Fusion, Planning Department, Power Shortage, RMB, Safety Concerns, Search Advertising, Thermal Coal, Traffic Growth, Transportation Infrastructure, Water Projects, Web Services Company
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Emerging Markets Diary (4/5/2010)

Monday, April 5th, 2010

Emerging Markets Diary (4/5/2010)
Strengths

• South Korea’s exports rose by a higher-than-expected 35.1 percent year over year in March, thanks to a recovering global economy that supported demand for semiconductors, automobiles and petrochemicals.
• China’s official Purchasing Managers’ Index rebounded to 55.1 in March from 52 in February, a 13th month of expansion. The HSBC version also increased to 57 in March from 55.8 in February.
• Consumer prices in Indonesia climbed 3.4 percent in March from a year earlier, which was lower than market expectations and below February’s 3.8 percent. This reduced the inflationary pressure and the urgency for its central bank to raise interest rates.
• Fourth-quarter GDP growth of 6 percent year over year in Turkey was above consensus expectation of 4 percent, according to Barclays Capital. Robust banking and household sector balance sheets could not prevent an output contraction of nearly 5 percent in 2009, but these factors are likely to play a significant role in the recovery in 2010, as Turkey can hope for more domestic demand stimulus than other countries in the region.

Weaknesses

• The Philippines was blacklisted by the European Union because of aviation safety concerns and all airlines based in the country would be prohibited from flying into the EU. This new policy affects about 40 carriers.
• Russian manufacturing growth remained sluggish in March, according to research by VTB Capital. The research signaled only a marginal improvement in the business climate. A fall in new orders was offset by a slightly sharper rise in output, as well as a weaker decline in employment.

  

Opportunities

• China’s imports from other Asian countries increased 64 percent year over year in the first two months of this year to $108 billion. Among the biggest regional winners are commodity-producing countries in Southeast Asia – imports from Malaysia and Indonesia jumped 104 percent and 100 percent, respectively. The ongoing drought in southwest China should help accelerate coal imports from Indonesia because of insufficient hydropower generation. Going forward, rising export revenues for Indonesia may translate into job growth and higher consumption.

  

• Robust manufacturing numbers in the export-reliant Czech Republic and Hungary continue to reflect these countries’ integration into the industrial production process in core Europe. The weaker euro also helps the exports, points out Barclay’s Capital research.

Threats

• According to an Interfax report on March 30, the Russian Ministry of Economy and Development is preparing a proposal for implementing a new taxation regime on fertilizers and non-ferrous metals, with an eye to increasing the export duties in these sectors. Diversifying revenue sources and the need to offer some breathing space to the already heavily milked oil industry might be the reasons behind the move.

Tags: Asia Imports, Asian Countries, Aviation Safety, Balance Sheets, Barclays Capital, BRIC, Business Climate, China, Countries In Southeast Asia, Emerging Markets, Employment Advertisement, GDP Growth, Global Economy, Household Sector, India, Inflationary Pressure, Marginal Improvement, Market Expectations, Petrochemicals, Purchasing Managers Index, Quarter Gdp, Regional Winners, Russia, Safety Concerns, South Korea
Posted in Energy & Natural Resources, Markets | Comments Off