Investment strategy Correspondent
Sujata's Feed
Mar 13, 2013

India inflation must fall to 4-6 pct, budget may help-cbank

March 13 (Reuters) – India’s stubbornly high inflation must
come down to a 4 to 6 percent range, the country’s central bank
chief said on Wednesday, noting full implementation of this
year’s budget will have a “softening impact” on price growth.

“The Reserve Bank has to ensure that inflation is brought
down to the threshold level and is maintained there,” Duvvuri
Subbarao, the Governor of the Reserve Bank of India (RBI)told
students in London.

Mar 12, 2013

Sovereign wealth funds to hit record $5.6 trln by year end-study

LONDON, March 12 (Reuters) – Sovereign wealth funds (SWFs)
are set to see their assets grow to $5.6 trillion by the end of
2013, a study found, a sum more than double British GDP and
underscoring their status as the world’s wealthiest investors.

SWFs, state-owned vehicles such as the Qatar Investment
Authority which manage windfall revenues for future generations,
have become key global market players after the financial
crisis, spending an estimated $90 billion buying up stakes in
Western banks including Barclays Plc for instance.

Mar 11, 2013
via Global Investing

Here comes the real

Inflation is finally biting Brazilian policymakers. The real strengthened around 1.5 percent last week without triggering the usual shrill outcries from government ministers. Nor did the central bank intervene in the currency market even though the real is the best performing emerging currency this year. The bank in fact shifted towards a more hawkish policy stance during its March meeting, a move that seems to have had the blessing of the government.

Friday’s data showed the benchmark consumer price index, IPCA,   up 0.6 percent for a year-on-year inflation rate of 6.31 percent. President Dilma Rousseff, who faces elections next year, took to the airwaves soon after to reassure voters about her commitment to taming inflation, announcing a series of tax cuts. That effectively is a signal that there is now no political constraint on raising interest rates. According to the political risk consultancy, Eurasia:

Mar 8, 2013
via Global Investing

Emerging Policy-”Full stop” in Poland but a start in Mexico?

An action-packed week for emerging monetary policy.

First we had Poland stunning markets with a half-point rate cut when only 25 bps was priced. Governor Marek Belka said the double-cut marked a “full stop”  after several cuts.  Then came Brazil which kept rates on hold at 7.25 but turned hawkish after spending over 18 months in dovish mode. (Rates stayed on hold in Indonesia and Malaysia).

In Brazil, it was high time. Inflation and inflation expectations have been rising for a while, the yield curve has been steepening and anxiety has grown, not only about the central bank”s commitment to controlling inflation but also about its independence.  Whether the central bank will actually start a hiking cycle anytime soon is another matter. Barclays reckon it will, predicting three consecutive 50 bps rate hikes starting from April. But analysts at Societe Generale are among those who are betting on flat rates for now. They point out that since the meeting, the Brazilian yield curve has moved to its flattest in a year and the 2017 inflation breakevens (the difference between the yields on fixed-rate and inflation-linked bonds of similar maturity) have fallen more than 50bps:

Mar 8, 2013

Analysis: Profit squeeze hammering emerging equities

LONDON (Reuters) – Record high stocks? Currency surges? In the United States maybe, but across emerging markets, slowing economies and collapsing exports are hammering company profits far harder than in the seemingly hobbled West.

While world stocks have risen more than 5 percent already this year, led by Wall Street’s surge to record highs, bourses from China to Brazil are flat to negative in dollar terms, unnerving those who fear a third year of stop-start performance.

Mar 8, 2013

Profit squeeze hammering emerging equities

LONDON, March 8 (Reuters) – Record high stocks? Currency
surges? In the United States maybe, but across emerging markets,
slowing economies and collapsing exports are hammering company
profits far harder than in the seemingly hobbled West.

While world stocks have risen more than 5 percent already
this year, led by Wall Street’s surge to record highs, bourses
from China to Brazil are flat to negative in dollar terms,
unnerving those who fear a third year of stop-start performance.

Mar 4, 2013

Russell Indexes to reclassify Greek equities as emerging

LONDON (Reuters) – Russell Indexes, which has $3.9 trillion tracking its market indices, will become the first major index provider to relegate Greek equities from the top-tier developed markets category to emerging markets.

The company said on Monday it planned to re-classify Greece at its upcoming annual index review in March and the move would become effective at the end of June.

Feb 28, 2013

Argentine bond yields surge as U.S. court raises default fears

LONDON (Reuters) – Argentine debt insurance costs and bond yields soared on Thursday after the first day of a U.S. appeals court hearing raised fears that the country is heading for its second huge default in 11 years.

Judges in New York said on Wednesday it was the court’s job to “enforce contracts, not rewrite them”, indicating the panel could ultimately uphold a previous ruling that instructed Argentina to pay all creditors in full, including those who refused to take part in past debt exchanges.

Feb 27, 2013
via Global Investing

Argentina back in court

Photo

Argentina squares off today in a U.S. Appeals court with the so-called holdout creditors who are demanding $1.3 billion in payments on defaulted bonds. A decision will probably take a few days but supporters of both sides have been mustering.

Emails have been pouring into journalists’ inboxes thick and fast from the Argentine Task Force, a lobby group that wants Argentina to settle with bondholders and identifies its goal as “pursuing a fair reconciliation of of the Argentine debt default”.  And yesterday, a noisy pots-and-pans protest was held outside the London offices of Elliot Associates (the parent company of one of the two hedge fund litigants)  by groups supporting Argentina in its battle against those it terms “vulture funds”.  Nick Dearden, director of the Jubilee Debt Campaign, a group that calls for cancelling poor countries’ debts, says:

Feb 27, 2013
via Global Investing

Time running out for Hungarian bonds?

Could Hungary’s run of good luck be about to end?

Despite controversial policies, things have gone the country’s way in recent months — the easing euro crisis and abundant global liquidity saw investors flock to high-yield emerging markets such as Hungary and also allowed it to tap international capital for a $3.25 billion bond. It has slashed interest rates seven times straight, cutting them this week to a record low 5.25 percent. The result is an increased reliance on international bond investors. Foreigners’ share of the Budapest bond market  is almost 50 percent, among the highest percentages in emerging markets.

But analysts at Unicredit write that both markets and economic data had validated rate cuts in 2012, which may not be the case any more. Annual headline inflation fell from 6.6% in September 2012 to 3.7% in January 2013 while the economy contracted 1.7% last year. As a result, net foreign buying of Hungarian bonds rose  in the second half of 2012 to 837 billion forints (an average daily rate of almost 6 billion forints), they note.  Markets are pricing at least 3 more cuts, that will take the rate to 4.5 percent.