Daily Archives: Sep 8, 2010

Brazil's real notesOne unintended consequence of Petrobras’s forthcoming share issue may be its impact on the value of Brazil’s currency, the real. Petrobras hopes to raise as much as $32bn from minority shareholders and, if other recent big issues are any guide, some 80 per cent of that will come from foreign investors.

The real has already rallied strongly against the US dollar in anticipation of the issue. On Wednesday the dollar fell 0.11 per cent in Brazil to R$1.725, down from a peak of R$1.865 in early June – in spite of two rare currency auctions during the day by Brazil’s central bank. Read more

Want the best bang for your buck? Emerging markets are home to the companies that create the most shareholder value, says the Boston Consulting Group.

A BCG report examining total shareholder returns at 712 companies in 14 industries around the world found the top ten performers are all listed in Asia – five in China, two in Hong Kong and one each in India, Indonesia and South Korea. Read more

Worries over slowing Chinese demand for Latin America’s exports and more signs of a sluggish recovery in the US weighed on Brazilian and Mexican stocks on Wednesday. Brazil’s Bovespa fell the most in a week after markets reopened following Tuesday’s holiday. But Chile’s blue-chip index gained as the central bank raised its growth forecast to between 5 and 5.5 per cent this year. Read more

Long-term forecasts are always fun. As long as the authors pick a date that is far enough away, few readers are likely to hold them to account. And so it was with Wednesday’s 20-year forecast for emerging markets from Goldman Sachs.

The bank predicts that in 2030 China could overtake the US in terms of stock market capitalisation as the value of the globe’s emerging stock markets rises fivefold to $80,000bn from $14,000bn. Read more

Talk about Latin America’s rising stars and the focus is often on Peru or Colombia. But don’t overlook the little countries: Paraguay and Uruguay are punching above their weight – and both have just been upgraded by rating agency Standard’s & Poor’s.

That’s a tribute to their economic performance: Uruguay rode out the global crisis without recession, while Paraguay is growing at its fastest rate in 30 years. Both are also catching the attention of some foreign corporate investors. Read more

Colombia’s tourism office recently ran an advertising campaign with the slogan: “The only risk is wanting to stay”. The idea was to convince people that images of a country beset by violence were outdated.

Now the country’s stock market is trying to attract foreign traders – arguing that Colombian equities have proved relatively safe, and promising to upgrade the exchange’s technology. Read more

Turkey needs investment, not fiscal rules to limit spending, its prime minister told broadcasters this week. The IMF disagrees.

The government has rejected any new spending constraints before next year’s elections. But in a sharp critique prefacing a new report on the Turkish economy the IMF says that “with the delay in legislating the fiscal rule, a crucial anchor for fiscal policy and expectations is missing.” Read more

Polish and Hungarian stocks hit one-month highs on Wednesday after Poland’s government successfully sold bonds and Hungary reaffirmed a 2011 budget deficit target of 3 per cent. Czech and Russian GDP figures were revised upwards, but Turkey came under criticism from the IMF for delaying the implementation of a fiscal rule that would impose new constraints on public spending. Read more

One sign that an emerging country’s consumers are getting less poor – but aren’t yet as rich as marketers would like – is the profusion of new brands. A-list companies that want to boost sales in places like China and India without going too obviously downmarket can offer lower-end products under assumed names, until their customers can afford to buy the real thing.

That appears to be the thinking behind Nissan’s decision to launch a separate car brand in China with its local partner Dongfeng Motor. Read more

By Jeffrey Sacks, Principal Global Investors

The fundamental and technical outlook for emerging market debt is strong, given the outlook for stronger economic growth than in the developed world and higher yields.

Confidence in these factors appears sustainable and is increasingly widespread. From an investor perspective the key is determining whether these prospects are yet fully discounted in the financial market. We think not. There is still plenty of value to go for, particularly in quasi-sovereign and Asian corporate high yield bonds. Read more

While all eyes are on the yen’s current strength, the Thai baht has also been scaling heights not seen for a long time.

It hit a 13-year high of Bt31.05 against the dollar on Wednesday, a day after the central bank said that it wasn’t going to intervene in the market. Read more

As the (very) long Christmas season in the Philippines gets underway, hundreds of directors and executives at state-owned companies are now expecting a meagre offering in their seasonal stockings.

On Wednesday, Benigno Aquino III, the country’s new president, issued an order freezing bonuses, perks and pay increases at government controlled corporations and financial institutions until the end of the year. But while the move should help scupper some eye-watering bonuses, there’s an increasing risk of collateral damage to the banking system.  Read more

The Baltic states did it. Slovakia did it. Even Russia did it. Now Ukraine is close to adopting a tax code that it claims will cut corruption and red tape – and be recognised as one of the most liberal in Europe.

The proof of the pudding will be in the eating. First the new laws must be adopted. Then they must be implemented. And once implemented they must be enforced. Liberal tax regimes have helped created fair business conditions in the Baltic states and Slovakia. But in Russia, the benefits have, to put it mildly, been less clear. Read more

It all started with faulty mood lighting. But now quality problems at both Kia and Hyundai are threatening to sour the bullish mood at South Korea’s big carmakers.

With one company facing large recalls, and the other an investigation into safety, they now both risk losing hard-earned consumer trust at precisely the time they need it the most. Read more

* Shanghai Pharma targets $1.2bn in Hong Kong IPO

* Tata Power may invest $15bn to increase capacity

* The dollar will maintain its dominance, says Chinese minister

* Vodafone sells China Mobile stake for $6.6bn

 Read more

Hungarians who borrowed heavily in foreign currency before the crisis have become tireless students of fluctuations in forex markets.

So the forint’s latest slump against the Swiss Franc is ringing alarm bells across the country this morning, as mortgages and other consumer loans become harder to repay. Read more

Asian stocks eased slightly from a one-month high on Wednesday. The MSCI Asia ex Japan index fell 0.7 per cent, on renewed caution over the global recovery. In Hong Kong, China Mobile erased its recent gains, after Vodafone sold a 3.2 per cent stake in the company for $6.5bn.

However, in Taiwan, there were signs that warming relations with China may lift the stock market. Read more

How far will Pakistan’s ruling elite, tainted with past allegations of corruption and profligate spending, give way to a credible new central bank governor who may really discipline the country’s wayward public finances?

That was the question widely making the rounds on Wednesday as Pakistan’s financial circles awaited confirmation of the appointment of Shahid Kardar, a respected veteran economist, as the new central bank governor. Read more

Why exactly is Carrefour selling its south east Asian supermarket businesses? It says it wants to focus on countries where it either is or has a good chance of becoming market leader. China, for example. But as Kevin Brown asks in today’s FT, isn’t the French company pulling out of the wrong markets at the wrong time?

After all, Asia, including south east Asia, is where the growth is. And the fact that around a dozen potential buyers, including the UK’s Tesco, are jostling to buy Carrefour’s cast-offs -for up to $1bn – raises questions about what the French are up to, says Brown. Well worth reading.

There is no word so far about the substance of the three-day talks in Beijing between a US team headed by Lawrence Summers, president Barack Obama’s economic adviser, and Chinese officials – even though there has been lots to talk about, starting with security, trade issues and the renminbi.

But there are big headlines today about China’s relations with its next most important political and economic partner – Japan. In a long-running row over disputed waters in the East China Sea, Japan arrested the captain of a Chinese fishing boat that collided with two Japanese coastguard ships. Read more