The received wisdom is dollar strength = weaker emerging market currencies. See here for my colleague Mike Dolan’s take on this. But as Mike’s article does point out, all emerging markets are not equal. It follows therefore that any waves of dollar strength and higher U.S. yields will hit them to varying degrees.
The corporate bond juggernaut continues apace in emerging markets.
In a note at the end of last week, analysts at Bank of America/Merrill Lynch estimated that companies from the developing world have sold debt worth $179 billion already this year. Originally, the bank had forecast $268 billion in corporate debt issuance in 2013, a touch below last year’s $290 billion but it is finding itself, like many others, marking up its estimates.
Central banks may be regaining some two-way control over global markets that had started to behave like a one-way bet. After flagging some unease earlier this month that frothy markets were assuming endless QE, the Fed and others look to be responding with at least some frank reality checks even if little new in the substance of their message. In truth, there may be no real change in the likely timing of QE’s end, or even the beginning of its end, but the size of the stock and bond market pullbacks on Wednesday and Thursday shows how sensitive they now are to the ebb and flow of central bank guidance on that score. Although the 7% drop in Japan’s stock market looks alarming – Fed chief Bernanke actually played it fairly straight, signalling no imminent change and putting any possible wind down over the “next few meetings” still heavily conditional on a much lower jobless rate and higher inflation rate. The control he gains from here is an ability to nuance that message either way if either the data disappoints or markets get out of hand.
Surprising as it may seem, the Egyptian pound has got some fans. The currency has languished for months at record lows against the dollar and the headlines are alarming — the lack of an IMF aid programme, meagre hard currency reserves, political upheaval. So what’s to like ?
Turkey’s elevation to investment grade last week may or may not be a game changer for its stock and bond markets, but the country is really hoping for a boost to FDI – bricks-and-mortar foreign direct investment into manufacturing or power generation. Its peace process with Kurdish separatists should help.
This is a reference when the People’s Bank of China makes big decisions.Difficulty in collating accurate data is perhaps not so surprising, given the rapid urbanisation of the world’s second largest economy. Off-beat labour statistics (employing dissimilar methodology to the ILO) are partly skewed due to a large number of temporary registrants that slip the official statistics net. The solution? Jinny Lin at Standard Chartered, who thinks China’s real GDP level is more likely around 5.5 percent, suggested this could be taken from the history books. Emperor Yongzheng, China’s ruler in the late Qing dynasty, set up an independent body to look at data at the local level, and successfully stemmed tax evasion.
If local data is reliable enough, we should use local data.
There seems to be no end to the rip-roaring bond rally across emerging Europe. Yields on Turkish lira bonds fell to fresh record lows today after an interest rate cut and stand now more than a whole percentage point below where they started the year.
Emerging markets may not have all the technological know-how in civil aerospace, but from China across the world to Brazil, they do have the cash.
Far from the rules of the dusty old investment almanac, it’s up, up and away in May after all. And judging by the latest batch of economic data, markets may well have had good reason to look beyond the global economic ‘soft patch’ – with US employment, Chinese trade and even German and British industry data all coming in with positive surprises since last Friday. Is QE gaining traction at last?
The world’s leading ad agencies are positioning themselves in Brazil, Russia and China — countries that are expected to provide almost a third of the growth in global advertising over the next three years. That’s according to a report by S&P Capital IQ Equity Research, a unit of publishing giant McGraw Hill.