Americas markets wrap: European debt and bank shares weigh on equities
Latin American markets fell again on Wednesday as the European debt crisis continued to fuel risk aversion, and Bank of America announced it would sell its stake in Itau Unibanco, the region’s largest bank.
While the euro bounced off four-year lows on rumours of central bank intervention to support the currency, investors remained uncertain about the state of the global economy.
Brazilian M&A: JPMorgan to buy Gávea hedge fund?
Brazil’s M&A rumour mill is in action again, this time over JPMorgan and Gávea Investimentos, a Rio de Janeiro hedge fund set up in 2003 by Armínio Fraga, former governor of the central bank, with R$10bn under management.
Mexico’s Compartamos eyes microfinance expansion in Latin America
Compartamos, a Mexican bank that dominates the country’s microfinance sector, is eyeing international expansion, reports Adam Thomson, the FT’s Mexico City bureau chief.
“In five, 10 or 15 years, this industry is going to have a few big players, and they are not going to be competitive by operating just in one country,” said Carlos Danel, co-founder and executive vice-president.
He said Latin America would be the first obvious region in which to expand, with Brazil, Peru and Colombia being particularly attractive markets.
As Brazil heats up, is the central bank behind the curve?
More evidence today that Brazil’s economy is indeed overheating: this story in O Estado de S. Paulo says growth is running at an annualised rate of almost 10 per cent.
That’s far more than the supply side of the economy can support without strong pressure on prices. Many economists say Brazil’s potential or non-inflationary growth rate is between 4 and 5 per cent a year.
Martín Redrado’s life after the central bank
In his old job, Martín Redrado never looked so relaxed. Gone are the dark suits. The former Argentine central banker, ousted earlier this year during a bitter row over President Cristina Fernández’s move to tap foreign currency reserves to pay debt, strolls into his chic office in a corduroy jacket, open-necked shirt and jeans.
Does he miss running the central bank? He smiles broadly. Not at all, he says, and looks like he means it. Now a consultant, he has a new book out, Sin Reservas (Unreserved) which tells his behind-the-scenes version of the reserves crisis.
Dispatch from a formerly exiled Russian oligarch
Living as a Russian oligarch in exile is a lot like Gabriela Garcia Marquez’s 100 Years of Solitude. So says Mikhail Gurtsiev in his first interview since returning to Russia two weeks ago after what he says were a long three years in London.
While Gurtsiev is willing to reveal a lot to Vedomosti – his love of the motherland and passion for writing poetry, for instance – the interview leaves more questions about his return, and its significance for other oligarchs abroad, as well as relations between the Kremlin and the business community in general.
How would a renminbi appreciation affect commodity prices?
The commodity markets have got the Hebei heebie-jeebies – everything from copper to oil to iron ore has suffered in recent weeks on fears that China’s attempts to cool its economy will end up cooling its appetite for raw materials.
Ironically, though, the widely-expected appreciation of the rmb against the dollar is likely to be a small positive for commodities prices.
The swings of market sentiment throw up some strange correlations and none stranger than the list of best- and worst- performing sovereign Credit Default Swaps of 2010. In percentage terms the winner is crisis-hit Ukraine, where the CDS has improved by 52 per cent, followed by other east European states and west European countries exposed to eastern Europe, headed by Sweden.
The worst performer is Portugal, with Greece and Spain near the bottom. So no surprises there. But wedged among them are some far more illustrious names – France, Belgium and, horror of horrors, Germany. The extent to which the eurozone crisis is redrawing Europe financial map is quite staggering, as the chart below shows.
Brazilians have been expecting China to invest billions in their country for years but until recently precious little had materialised.
Now the Chinese are on the march. This week it emerged that State Grid, China’s biggest electrical utility, would pay R$3.1bn ($1.7bn) for seven Brazilian electricity transmission companies.
Indonesia finance minister pick sends positive message on reform
The appointment of the head of Indonesia’s largest bank to the politically-charged job as finance minister sends a good signal that President Susilo Bambang Yudhoyono has not given up on reform.
Bank Mandiri President Director Agus Martowardojo will take over from Sri Mulyani Indrawati. Martowardojo has won a reputation for standing up to vested interests, of which there are many in Indonesia. His qualities are about to be put to the ultimate test.
Equities took another bashing today and currencies fell as investors digested news of Germany’s ban on naked short selling – and were uncertain how far its impact would extend.
CEE currencies fell particularlty sharply in later trading when the euro rallied on rumours that the ECB would intervene to stop the euro’s steep descent to four-year lows against the US dollar. Protests in Romania against pay cuts the government must make under its €20bn IMF deal didn’t make much of a dent on its stocks and the Romanian leu was faring better against the euro compared to other CEE currencies in late trading.
“Beijing property prices could fall 40 per cent” – but so what?
What would happen if Beijing property prices fell by 40 per cent? If you listened to the Chinese bears, symbolised by the campaign waged by renown short-seller, Jim Chanos, such a fall would simply be China’s credit chickens coming home to roost. Chanos, who admits to never having visited China, recently described the country as “Dubai times 1,000 – or worse.”
Given the size of China and its role in the global economy, that is a scary prospect.
The violence raging across Bangkok is taking its toll on the large community of foreigners in the Thai capital. Offices have closed down and some business people have packed their bags to leave if the fighting is not contained soon.
One British businessman who lives with his Japanese wife said his downtown street – known for its swank cocktail bar – was overrun by protesters, who fired at soldiers and set up tyre and dirt barricades.
“I went back to my apartment yesterday morning…The military and red shirts had a gun fight there the night before. We couldn’t go home.”
Capital Economics on Thailand: Stress on markets diminishing, rally to come
Kevin Grice, senior international economist at Capital Economics, says that today’s events in Bangkok have done little to change the house view put out on Monday. With protests largely contained to Bangkok and not clear sign of a surge of support for the Red Shirts, Grice sees the repercussions for the Thai economy as relatively small, and a high chance of a rebound in stocks in the coming weeks.
Asia’s emerging wealthy elite don’t have a wide reputation for giving to charity, but new data shows they have not been getting the credit they deserve.
India this week become the first BRIC country to be ranked a major donor by Save the Children, reflecting widening philanthropy in the world’s fastest growing economy after China. It is now on a par with donors like Italy, Germany, Romania and South Korea.
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