Daily Archives: Sep 26, 2011

What are the chances of Mexico’s central bank intervening to ease the depreciation of the local currency?

That question has come to the fore recently as Latin America’s second-largest economy saw its currency depreciate against the dollar 11 per cent in the last month alone.

According to Nomura, the chances of some sort of intervention – probably along the lines adopted in late 2008 when the bank intervened following movements in the currency exceeding 2 per cent a day – are much more likely to take place if one of three conditions are met. Read more

The US wants Argentina cut off from multilateral development loans. First of all: how serious is the risk?

It’s had to say yet for sure, but the US has a 30 percent voting share at the World Bank and 17 percent at the IADB, which means its actions carry weight. On September 14, the US voted against a $230 million loan to Argentina and says it will continue to vote ‘no’.

What, then, are the risks if loans from these institutions were to be blocked? Image, mainly. Read more

Procter & Gamble (PG:NYQ) has faced persistent gripes from investors for not being big enough in emerging markets: it has annual EM sales of $27bn, but they contribute a lower proportion of its revenues than at rivals such as Unilever and Colgate-Palmolive.

While catching up entails a lot of hurdles, Bob McDonald, chairman and chief executive of the US consumer goods giant, says competition from domestic rivals in emerging markets is not one of them. Read more

While the markets have spent most of September reeling from the eurozone debt crisis, the emerging markets have had the mantle of world saviours foisted upon them. Except the pain is spreading: EMs have had a terrible third quarter in mergers and acquisitions.

According to figures released by Dealogic on Monday, emerging markets M&A for the first nine months of 2011 was down 16 per cent from the same period last year – a fall of $102bn to $535.9bn – mainly due to the third quarter numbers. The only beacon of hope is China. Read more

Wipro, India’s third-largest software maker by revenues, may have under-performed against its chief competitors in the Indian IT sector this past fiscal year. But that has not stopped the group from handing out nearly $300m in dividends to shareholders – an increase of 68 per cent from the year before.

With the high price of acquisitions dampening IT companies’ investment opportunities, it would make sense for high-growth, cash-rich companies to disburse dividends to shareholders. But analysts said they were confused by Wipro’s growth strategy, especially considering that billionaire founder Azim Premji – who owns over 79 per cent of the company – and his family received the vast majority, around $270m, of that money. Read more

At a time when most global investors seem to be fleeing emerging markets for new safe havens, Goldman Sachs’ decision to invest about $200m in ReNew, a little known Indian green energy start-up, comes as a surprise.

But look beyond the current economic turmoil that has led the Indian rupee to plunge over the last few weeks, and the US investment bank’s move to buy a majority stake in the country’s emerging renewable energy sector makes a lot of sense, analysts say. Read more

Dmitry Medvedev,Russian president, speaks Sept 2011The fight at the top of Russian politics has got ugly. While prime minister Vladimir Putin has encountered no resistance in reclaiming the presidency, his plans for a smooth job swap with his protege Dmitry Medvedev (pictured) are going seriously awry.

After Alexei Kudrin, the respected finance minister, said he would not work in a Medvedev government, Medvedev on Monday hit back and told Kudrin to his face – and in public (see video after the jump) – that he should resign.

Kudrin, initially said he would consult Putin but, moments later, he quit.  Instead of an orderly transfer of power, Putin has seen a messy power struggle between two of his closest lieutenants. Read more

Although Vietnam is the world’s second biggest producer of coffee (after Brazil) and coffee shops proliferate on the streets of Hanoi and Ho Chi Minh City, domestic consumption lags way behind that of neighbouring countries.

Now local and international coffee producers are hoping to boost consumption in the country as they seek a more sustainable model for an industry that has been susceptible to historical swings in the global coffee price. Read more

Rice is more than just another commodity: for 3bn people it is a vital part of their daily diet, and when prices hit over $600 a tonne, or some 50 per cent above their 10 year average, they start to worry.

The 10-year average for Thailand’s benchmark 100 per cent grade B white rice is around $400 a tonne but today it is selling for $619 a tonne. That is partly because Thailand, the world’s biggest exporter, has said that it would pay its farmers Bt14,800/tonne – equivalent of about $800/tonne in the export market, in a move aimed at boosting the incomes of rural farmers. Read more

The narrowing of China’s trade surplus in August, when it fell to $ 17.8 bn from $31.5bn in July, was widely welcomed when figures were released a fortnight ago. Imports had surged 30 per cent.  The surplus for the first eight months of 2011 was $92.7bn, down 10 per cent. In a world searching for silver linings amid the glowering clouds, this counted as bona fide good news.

Then along comes Andy Xie, the iconoclastic Shanghai-based economist, with forecasts that rain on hopes for any imminent rebalancing of the world’s economy. Read more

Whenever Lee Myung-bak, South Korea’s president, meets another world leader, you can expect his office to make celebratory statements about promises of co-operation in energy and resources. In the last few weeks, we have had Colombia, Mongolia and Kazakhstan.

Korea is Asia’s fourth-biggest economy but has almost no oil, gas or minerals. Seoul says its whirlwind diplomacy is securing Seoul’s “energy security”. Despite the deep pockets of the Chinese and the technical prowess of the multinationals, Korea can still compete, the story goes. Trouble is, it’s all nonsense, according to members of the parliamentary energy commission. Read more

* Russian job swap sparks Kremlin revolt

* Saudi king says women will be given vote

* ‘Credible India’ drive to woo investors

* Syria moves to protect foreign reserves Read more

Kremlinology has never been an exact science. During the Cold War, teams of CIA analysts would pore over the seating order of the May Day parade bandstand to see who was up and who is down, while today, experts parse Dmitry Medvedev’s tweets and Vladimir Putin’s bulging neck veins for any clues as to the future pecking order.

But one indicator of succession has never failed in more than a century: the bald/hair dichotomy. Read more

The outcome of Taiwan’s upcoming presidential election matters to investors because who wins in January will have a big impact on whether or not Taiwan continues to move closer economically to China.

With just three months to go, it is frustrating that the partisan local opinion polls are little help in figuring out whether incumbent Ma Ying-jeou or Tsai Ing-wen, leader of the opposition Democratic Progressive Party, is ahead. But fear not, the financial markets offer some hope of forecasting the winner. Read more

Monday’s top picks from the beyondbrics team: turbulent emerging market currencies (Lex), the pros and cons of Putin’s return, and the divide between India’s rich and poor.

 Read more

Alexei Kudrin, Russian finance minister, June 2011Other things being equal, prime minister Vladimir Putin’s decision to return to the Kremlin and swap jobs with president Dmitry Medvedev was not expected to scare investors. It promised stability and had, in any case, been widely forecast.

But suddenly other things are not equal. Alexei Kudrin (above), the much admired fiscal hawk, has upset the carefully-laid Putin plan by publicly declaring that he won’t serve in a Medvedev government.

Investors don’t seem to like it. Instead of the calm reception that Putin and Medvedev might have expected, Russian markets are down on Monday – although how much is due to the local politics and how much to the global economic mess is hard to say. Read more

Asian financial markets slumped on Monday as fears that European leaders are failing to get to grips with the eurozone crisis undermined global economic confidence.

With US Treasury secretary Timothy Geithner warning at the weekend IMF/World Bank meeting of the danger of a “catastrophic risk”, there was a sell-off from Manila to Mumbai with foreign investors leading the rush to the exits.  The biggest victim was Bangkok, where shares plunged nearly 8 per cent. Read more

* Russia’s finance chief rebels over Putin plan

* Saudi king says women will be given vote

* ‘Credible India’ drive to woo investors

* Syria moves to protect foreign reserves Read more

Institutions wondering about the safety of piling into emerging market debt might be cheered by some regulatory developments, outlined in a report in Monday’s FTfm.

The International Centre for the Settlement of Investment Disputes at the World Bank, with its recent ruling that a group of Italian bondholders could bring a group action against Argentina to the tribunal, has changed the whole ball game, experts say. Read more