Daily Archives: Nov 16, 2011

Argentina’s first stab at reducing utilities subsidies two weeks ago underwhelmed the market – the $140m cut in a bill of more than $10bn was seen as a timid response to an unsustainable problem.

So Argentina has now announced that more large-scale companies – this time in the refinery, gas processing, biofuels and agrochemicals sectors – will lose their gas, electricity and water subsidies. The move is designed to rake in another $830m. 

Is the fallout from the eurozone hitting Latin America? Yes and no. Here are two headlines that popped up one after the other on a beyondbrics terminal on Wednesday afternoon:

Chile Peso Slides for Third Straight Day on European Debt Woes
Chilean Central Bank Sells Five-Year and 10-Year Peso Bonds

Er – is that risk off or risk on? 

Somebody forgot to tell Panama about the eurozone crisis. While the rest of the world is slowing, its economy is set to expand by 10 per cent this year and 7.5 per cent next. And those are real figures, as Finance Minister Frank de Lima told beyondbrics. In the nominal terms most people use, those numbers hit the teens. Few countries, perhaps none, can match that. 

Investors are betting against the Egyptian pound, expressing their belief that it is soon to take a dive through the futures market while the spot market is held up by Egyptian government support.

The pound’s twelve-month non-deliverable forwards (NDFs) weakened 2.8 per cent on Wednesday on fears that Egypt’s reserves, which are being used to support the currency, might be reaching critical levels. The spot market, in contrast, held steady – but for how long? 

Poland’s zloty has a tendency to sag whenever market perceptions of central Europe begin to waver – and this week, with growing worries of a Hungarian downgrade spooking investors, is no exception.

But the fall could have been a lot steeper without steady interventions by the state owned Bank Gospodarstwa Krajowego. 

The US has always been a cheerleader for the planned Nabucco pipeline to carry Caspian gas to Europe to compete with Russian supplies. But as Nabucco’s search for gas producers to support the project wears into an eighth year, even Washington has begun to pipe down. 

It’s never a dull moment in Russian equities. In early 2011 they soared 21 per cent, on strong oil prices and hopes of a global economic recovery, an increase four times larger than the 5 per cent rise in global emerging markets.

In the grim months that have followed, Russia is down nearly 30 per cent, compared to a 21 per cent drop in EM overall. And there’s little chance of a recovery without a meaningful resolution of the euro crisis

Banco do Brasil is getting ready to issue a $500m five-year bond as early as Wednesday, Bloomberg reports. So there’s still money out there.

With the eurozone crisis reaching fever pitch the fact that the Brazilian government had a huge hit with its $1bn 30-year bond just 12 days ago – at a yield of just 4.7 per cent – doesn’t make Wednesday’s issue a ho-hum everyday deal. Analysts tell beyondbrics that financial contagion from the eurozone is already hitting Latin America and economic contagion will follow. But Banco do Brasil shows the EM safe haven story is still alive. 

There is a lot of pressure on Bric nations to power the global economy right now and by one metric at least things are looking good – the combined international debt capital markets (DCM) volume for the Brics reached a new record high in 2011 for the second time in two years, according to data from Dealogic. 

Last month Moscow’s Bolshoi Theatre re-opened after a painstaking six-year renovation that saw the 186-year-old venue’s interior made over with the help of materials ranging from squirrels’ tails and animal teeth to whale grease and vodka, and an estimated bill of $690m.

But now the Bolshoi appeares to have once again found itself buried in the same old problems. 

* Eurozone bonds hit by mass sell-off

* Turkey increases pressure on Assad

* Qatar humiliates Airbus, then places $6.4bn order

* China Foreign Investment Rises at Faster Pace 

The trial of Boris Berezovsky vs Roman Abramovich has highlighted Russia’s political and corporate governance issues. But will the case impact foreign investor appetite in the country? Daniel Garrahan reports.

Video after the break:

 

Wednesday’s top picks from the beyondbrics team: Lex on the report that (almost) exonerates Sino-Forest; the hard fall of eastern Europe’s currencies; the growing rivalry between Islamist parties in the run-up to Egypt’s elections; and China’s anti-monopoly law shows its teeth. 

The storm blowing from the eurozone whipped around Asian financial markets again on Wednesday, pushing down equities and key currencies.

The MSCI Asia-ex-Japan index was down 1.5 per cent at 0840 GMT, pulled down by sharp declines in banking stocks,  including Standard Chartered Bank (STAN:LSE). If even the most EM-oriented of international banks – down 26 per cent in 12 months – is suffering, there really is nowhere left for investors to hide. 

Bloomberg

The acting governor of Guangdong province has caused a bit of a stir by telling visiting journalists and analysts that the “factory of the world” faced a downturn as bad as the one in 2008/2009.

“The European debt crisis has hit the exports sector dramatically. Export in Guangdong is facing as serious a challenge as in 2008,” said Zhu Xiaodan.  Such straight talk from a government official in China, where bad press is not encouraged, is rare. So what’s going on?