LONDON, Jan 21 (Reuters) – Economic growth in emerging
Europe and North Africa will pick up to 3.1 percent this year,
benefiting from an easing of the euro debt crisis, development
bank EBRD said on Monday.
Although slightly trimmed from earlier forecasts, the
prediction by the European Bank for Reconstruction and
Development is an improvement from last year’s 2.6 percent
growth rate for the region under its remit.
(corrects name of hedge fund in para 3 to Symphony Financial Partners)
Any doubt about the importance of a weaker yen in thawing the frozen Japanese economy will have been dispelled by the Nikkei’s surge to 32-month highs this week. Since early December, when it became clear an incoming Shinzo Abe administration would do its best to weaken the yen, the equity index has surged as the yen has fallen.
Those moves are giving sleepless nights to Japan’s neighbours who are watching their own currencies appreciate versus the yen. South Korean companies, in particular, from auto to electronics manufacturers, must be especially worried. They had a fine time in recent years as the yen’s strength since 2008 allowed them to gain market share overseas. But since mid-2012, the won has appreciated 22 percent versus the yen. In this period, MSCI Korea has lagged the performance of MSCI Japan by 20 percent. Check out the following graphic from my colleague Vincent Flasseur (@ReutersFlasseur)
When will Brazil’s central bank admit it has an inflation problem? Markets will be watching today’s rate-setting meeting for clues.
There is no doubt about the outcome of today’s meeting at the Banco Central do Brasil (BCB) — no one expects it to do anything but leave interest rates steady at the current 7.25 percent. But the BCB has been focused on growth for 18 months and has cut interest rates by 525 basis points in this time, its actions helping to drive the real 10 percent lower last year versus the dollar. The government meanwhile has unleashed huge doses of fiscal stimulus. The result, rather than a growth recovery, is a steady rise in inflation.
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.
All that is spooking foreigners who own more than 30 percent of the domestic bond market. The currency weakness hit them hard last year as Indonesian bonds returned just 6 percent, a third of the sector’s 16 percent average (see graphic).
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.
Yet not everyone is optimistic and most analysts see last year’s returns of 16-18 percent EM debt returns as out of reach. The consensus instead seems to be for 5-8 percent as tight spreads and low yields leave little room for further rallies — average yields on the EMBI Global sovereign debt index is just 4.4 percent. Domestic bonds meanwhile could suffer if inflation turns problematic. (see here for our story on emerging bond sales and returns).
LONDON, Jan 11 (Reuters) – Asian firms and Eurobond
debutants from Africa will be prominent among emerging borrowers
hoping to tap buoyant appetite for high-yield assets in 2013
although issuance and investor returns may fall short of last
The new year has got off to a flying start. Investors, for
example, lent Turkey cash repayable in 10 years at a cost of
3.47 percent, the lowest it has achieved in the dollar debt
LONDON, Jan 11 (Reuters) – Asian firms and African
governments will lead emerging borrowers hoping to tap into
buoyant appetite for high-yield assets in 2013 although issuance
levels and investor returns may fall short of last year.
The new year has already got off to a flying start -
investors lent Turkey cash repayable in 10 years at a cost of
3.47 percent, the lowest it has ever achieved in the dollar debt
Could Asia be headed for a debt crisis?
The very thought may seem ludicrous given the region’s mighty current account surpluses and brimming central bank coffers. But a note from RBS analysts Drew Brick and Rob Ryan raises some interesting concerns.
Historically speaking, most EM crises have been borne on the back of excessive capital inflows, Brick and Ryan write. And in many Asian countries, the consequence of these flows has been over-easy monetary policy that has left citizens and companies addicted to cheap money. Personal and corporate indebtedness levels have spiralled even higher in the past five years as governments across the continent responded to the 2008 credit crunch by unleashing billions of dollars in stimulus.
LONDON, Jan 10 (Reuters) – Emerging markets ended 2012 with
a modest acceleration in economic growth thanks to a pick-up in
manufacturing activity that hints at further improvement in
coming months, a survey found on Thursday.
All four big BRIC economies posted a rise in economic
activity in the last quarter of 2012, with Chinese manufacturing
returning to growth for the first time in 18 months, according
to HSBC’s emerging markets index (EMI).
LONDON (Reuters) – The key to preventing a messy devaluation of Egypt’s pound may lie with the country’s households, whose dollar holdings are being eyed by foreign investors as a critical gauge of trust in the authorities.
Countless emerging market crises have shown over the decades that it is not the withdrawal of foreign investors from a market but the flight of local households and businesses from a currency that is instrumental in its collapse.