Bill Rhodes: Beware of inflation risks in China and the US
Bill Rhodes, one of the world’s greatest financial diplomats, called the Asian debt crisis in 1996 – one year before it hit. The former vice chairman of Citi, who cut his teeth helping lead Latin America’s sovereign debt restructurings in the 1980s, also correctly called the US sub-prime crisis – again one year before it hit.
Each time he was called Cassandra, yet his predictions subsequently proved right. So what is Mr Rhodes most worried about now? In one word: inflation. Continue reading »
Experian: Taking a bite out of the Columbian credit pie
Experian, the world’s largest credit checking company, took another step towards boosting its presence in Latin America on Tuesday following a deal to buy Columbia’s Computec for 736bn Colombian pesos ($400m).
With many Latin American countries enjoying strong economic growth on the back of soaring commodity prices, banks have been stepping up their lending to the continent’s growing middle class. As lending rates have grown, so has demand for credit checks. Continue reading »
Hungary: latest supply chain victim
It’s been nearly two months since Japan was hit by devastating earthquake and tsunami. Yet the fallout is only being felt now 9000 kilometers away in Hungary.
In another example of how increasingly complex and fragile the global supply chain has become, Magyar Suzuki, the Hungarian arm of the Japanese auto maker, said it has to move from double to single shift working this week as the supply of parts – including key electronics components – from factories in Japan affected by the disaster dries up. Continue reading »
Russian banks: poor marks in stress test?
Russia’s central bank has just completed a stress test of the country’s banking sector: and the answer isn’t pretty. According to the results, nearly a third of Russian banks would not be able to withstand a repeat of the global financial crisis, or krizis as the Russians call it.
But the news is not as bad as it seems. Many of the banks that would fail are not “real” banks at all – and are expected to close down in any case. Continue reading »
Indian rates: tightening the screw
India’s unexpected move to raise rates by 50 basis points on Tuesday, after eight 25 bp hikes, is a clear sign the authorities are getting worried that efforts to control inflation aren’t working.
And if the authorities are worried, so are investors. Indian equities fell 2.4 per cent to its lowest level for six weeks with fund managers worried about the impact on growth in GDP and corporate profits – and the likelihood of further hikes in the coming months. Continue reading »
Swedish showdown on China’s roads
First Volvo, now Saab. Chinese car drivers will soon have more Swedish cars to choose from after Hawtai Motor Group agreed to invest €150m in Saab Automobile in exchange for a 29.9 per cent stake.
The deal comes less than a year after Geely, China’s largest privately-owned carmaker, bought Volvo, the other mass-market Swedish car brand, from Ford.
China: are power cuts possible?
Chinese officials have warned in recent weeks that the country could face power shortages this summer in what would be an embarrassing setback for the world’s largest energy consumer.
But is this a real threat? Or is it just sabre-rattling by power companies keen to secure from the authorities increase in state-controlled electricity prices to compensate for rising world coal costs? It’s probably just talk, but nobody can be quite sure. Continue reading »
Posco in India: hold the cheers
India’s environment ministry gave its final clearance to Posco, the Korean steelmaker, to construct its $12bn steel plant in the eastern state of Orissa on Monday. The news will come as a relief to investors who have watched the project delayed by protests and environmental concerns since 2005.
But the question now is just how long it will take before world’s third largest steelmaker begins construction? Even after six years, Posco’s struggle may not quite be over. Continue reading »
ME economies: the rough and the smooth
Quantifying the economic collateral damage from unrest in the Middle East might seem a grim task, but it’s not all bad news.
The spike in oil prices provoked by political upheaval has boosted the rate of GDP growth in the oil exporting Gulf Cooperation Council states to an estimated 6.5 per cent for 2011, according to a new regional economic report from the Institute of International Finance. For regional oil importers – many of whom are embroiled in political riots – the picture is less attractive: as a group they will see a fall in growth of 0.5 percentage points in 2011. Continue reading »
Mongolia: riskier than Belarus?
Mongolia may be the darling of the mining world and a hotspot for investors in developing Asian economies. However as far as the credit markets are concerned, it might as well be a Greece or a Belarus. That’s according to Moody’s, which outlined the risks facing this young, resource-rich democracy in its recent annual report. Continue reading »
The royal wedding in Brazil: knock-off rings and posh frocks
By Iona Stevens in São Paulo
Britain’s royal wedding has done its part, however small, to increase Brazil’s trade deficit with China. Cheap Chinese versions of Kate Middleton’s engagement ring were sold by the dozen last week right before Friday’s ceremony.
It’s another sign of the ability of the Chinese manufacturers to respond rapidly even to individual events and turn their factories to mass production of the most varied items. It makes you wonder what cheap Chinese imports will flood shopping streets around Brazil during the World Cup in 2014. Continue reading »
New York headlines
* India raises rates to rein in inflation
* Pakistan: not part of US operation to kill Osama bin Laden
* India clears Posco’s Orissa steel project
* Swiss freeze Gaddafi, Mubarak and Ben Ali’s funds
* Tata Steel plans more investment in China Continue reading »
Romania: betting on the leu
Romania’s central bank on Tuesday left its key interest rate unchanged at 6.25 per cent, even though policymakers in emerging markets are generally raising rates to curb inflation.
With rates already the highest in the European Union, the National Bank of Romania doesn’t want to risk harming the country’s fragile economic recovery. It’s betting that a surge in the leu will ease inflationary pressures enough to justify its approach. Given Romania’s high-inflation history, it’s a risky strategy. Continue reading »
A CIVETS index: herding cats?
Among the post-BRIC acronyms competing to encapsulate the prospects of other chunks of the emerging world, CIVETS is gaining the most ground.
On Tuesday, S&P joined the bandwagon by launching S&P CIVETS 60 – a tradeable index of 50 stocks from the next-generation EMs of Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Even more of a mixed bag than the BRIC quartet of Brazil, Russia, India and China. But CIVETS equities have outperformed the BRICs in recent years. And for investors, that’s what counts. Continue reading »
Further reading: working out the numbers
Tuesday’s best picks from the beyondbrics team: Pakistan’s net profit from generating hydroelectric power is almost five times as much as the amount allocated to fighting terrorism, the mind-numbing toll from Mexico’s violence, and as many people have been killed by deer as by terrorists.
Just for fun: animation of Operation Osama bin Laden. Continue reading »
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