MacroScope

from Global Investing:

Which BRIC? Russia scores late goal for 2010

How quickly times change. Russia's stock market, unloved for months, last week overtook India to be the best-performing of
the four BRICs.  The Moscow stock index jumped 5 percent last week, posting its biggest weekly rise in seven months, bringing
year-to-date gains to 17.5 percent. Fund managers such as Goldman Sach's Jim O'Neill, creator of the BRICs term, are predicting it will lead the group next year too.

SOCCER-WORLD/

So what's with the sudden burst of enthusiasm for Moscow? One catalyst is of course soccer body FIFA's decision to award
the 2018 Soccer World cup to Russia. Investors are piling into infrastructure stocks, with steel producers especially tipped to
benefit as Russia starts building stadia, roads and hotels.  But the bigger factor, according to John Lomax, HSBC's head of emerging equity strategy, is the optimism that has started creeping in about U.S. -- and world economic growth.

Some of that may have been dampened by Friday's lacklustre U.S. jobs data. But overall, checks of U.S. economic vital signs show the economy looking sturdier than it was six months ago and most banks, including the pessimists at Goldman Sachs, have upped 2011 growth forecasts for the world's biggest economy. And China and India are continuing to grow at rates close to 10 percent.  All that is great news for the commodity and oil stocks -- the mainstay of the Russian market. Merrill Lynch, for instance, expects oil prices to be $10 higher by next December than now.

"Investors are getting more confident about the cyclical upturn," Lomax says, citing oil prices and the recent rise in U.S. yields. "So you want to be in Russia which is a global growth play."

The icing on the cake is the price of Russian stocks. They trade around 6 times 2012 earnings compared to 10 times for emerging
stocks as a whole.  Goldman's O'Neill points out fellow-commodity exporting BRIC, Brazil, trades at much higher valuations while the currency too is more expensive. And India, this year's runner-up is likely to suffer from a double whammy of high inflation and extremely high
valuations -- Mumbai trades at 16-17 times 2012 earnings.

from Global Investing:

PIGS, CIVETS and other creature economies…

Given the ubiquity of BRICs and PIGS, it seems everyone else in the financial and business world is attempting to conjure up catchy acronyms to group economies with similar traits. All with varying degrees of success. BRITAIN-WEATHER/

HSBC chief Michael Geogehan has been championing 'CIVETS' to describe Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa as the next tier of developing economies poised for spectacular growth.

Evoking the skunk-like animal blamed for the spread of the deadly SARS outbreak in Asia is not exactly auspicious but then it will probably be less offensive than the porcine moniker for Portugal, Italy, Greece and Spain. The collective term -- with permutations such as PIIGGS to include Ireland and Great Britain among the list of debt-ridden countries -- has been denounced by politicians in Portugal and Spain.

from Global Investing:

Shock! Emerging capital controls may just be working

Do capital controls work?  After years of telling us that they do not, the IMF and World Bank reluctantly conceded last year they may not be all that bad and indeed in some cases they may actually help keep away some of the speculators who have in recent years been pouring into emerging markets.

Developing countries for the most part like foreign capital, indeed they rely on it for development. What they don't like is hot money -- short-term speculative flows which are widely blamed for causing past emerging market crises. So starting from October last year several of them slapped controls on some of this cash. There are signs these may be working.

Take the experience of two large emerging markets, Brazil and Indonesia. Brazil shocked forBRAZIL-MARKETS/eign investors last October with a 2 percent tax on all flows to stocks and bonds. Nine months on, investors are still putting their cash there and Brazil has raked in millions of dollars thanks to the tax. But many fund managers, like HSBC's Jose Cuervo, who runs a $6 billion portfolio of Brazilian stocks, are buying American Depositary Receipts (ADRS) of Brazilian firms rather than stocks listed in Sao Paulo.  Because ADRs are in dollars and listed in New York, investors are getting exposure to Brazil but sidestepping the tax.  Brazilian firms continue to receive investment but Brazil's currency is not appreciating  like it was last year. A win-win all around.