Indonesia has just given the go-ahead for another leg down in the rupiah. It has cut its forecasts for the exchange rate to 9,700 per dollar compared to the 9,200 level at which the central bank used to step in. The currency has duly weakened and nervous foreigners have rushed to hedge exposure — 3-month NDFs price the rupiah at almost 10,000 to the dollar. The rupiah last week hit a three-year low, its weakness coming on top of a dismal 2012 which saw it fall 6 percent as the current account deficit worsened. Traders in Jakarta are reporting dollar hoarding by exporters.
Emerging bonds have got off to a flying start in 2013, with debt funds taking in over $2 billion this past week, the second highest weekly inflow ever, according to fund tracker EPFR Global. Issuance is strong - Turkey for instance this week borrowed cash repayable in 10 years for just 3.47 percent, its lowest yield ever in the dollar market.
The first wave of Q4 US earnings, Chinese Q4 GDP and European inflation dominate next week, while regional polls in Germany’s Lower Saxony the following Sunday give everyone a early peek at ideas surrounding probably the biggest general election of 2013 later in the year.
Global Investing has written several times about Japanese mom-and-pop investors’ adventures in emerging markets. Most recently, we discussed how the new government’s plan to prod the Bank of Japan into unlimited monetary easing could turn more Japanese into intrepid yield hunters. Here’s an update.
Investors keen to wade deeper into the euro zone’s quieter waters will have 765 billion euros, or just over $1 trillion, worth of fresh government bonds offered to them this year, nearly 8 percent less than in 2012, Deutsche Bank writes in a report.
The new year starts with a markets ‘whoosh’, thanks to some form of detente in DC — though this one was already motoring in 2012. The New Year’s Eve rally was the biggest final day gain in the S&P500 since 1974, for what it’s worth. And for investment almanac obsessives, Wednesday’s 2%+ gains are a good start to so-called “five-day-rule”, where net gains in the S&P500 over the first five trading days of the year have led to a positive year for equity year overall on 87 percent of 62 years since 1950.
Investment banks have been dismayed this year by the slump in first-time share listings across emerging markets, the area they had hoped would yield the most growth (and fees). But as we pointed out in this story, emerging IPO volumes fell 40 percent this year. And equity bankers have seen lucrative IPO fees dry up – they almost halved this year from 2011 and are a third of 2007 levels.