Daily Archives: Oct 1, 2012

Here’s something you don’t hear very often: Chile and Russia are quite similar.

Odd as that might sound – after all, Chile conjures up images of success, stability and transparency while Russia has, as Ben Aris of bne put it in a post here recently, an “appalling investment image” – that was indeed Michael O’Flynn’s pitch to Chilean investors at a recent conference in Santiago. Read more

HSBC manufacturing purchasing mangers’ indexes for Mexico and Brazil, published on Monday, give support to what is becoming a prevailing view on both countries: that Mexico’s outlook remains strong if uncertain; and that the downturn in Brazil is bottoming out. Read more

There were a lot of things for investors to take into consideration in South Africa on Monday: ANC nominations; the recent Moody’s downgrade; poor PMI numbers; the start of an inquiry into the Marikana strike deaths; and, not least, the inclusion of the country’s debt into a key bond index.

As a result, markets have been a little up and down, to say the least. Read more

The core economies of central Europe are continuing to show signs of a slowdown, despite some signals that the downturn may have bottomed out in the eurozone and in Germany – the original sources of the disruption hitting the Czech and Polish economies.

Poland surprised on the downside on Monday, with worse than expected Purchasing Managers’ Index numbers. Poland recorded 47 on the index – where anything below 50 indicates a contraction – compared with 48.3 in August, making a sixth straight month of PMI falls. Read more

Photo: Bloomberg

Turkey won itself a dubious honour at the weekend: a fuel tax hike made it the mainstream economy with the most expensive petrol in the world. It all depends on the vagaries of the exchange rate of course, but the new price of TL4.83 a litre, or €2.08, outstrips Norway’s €2.06, according to AFP, leaving other high fuel tax economies such as Italy, the Netherlands and Spain some way behind.

Then the government followed by increasing gas and electricity rates by 10 per cent on Monday. Read more

Vladimir Putin has been holding forth about what Russia will gain by investing billions of dollars in preparations for the 2018 World Cup. Apart from boosting investment in infrastructure, the football will have a positive impact on the health of the nation by encouraging people to quit smoking and drinking and play sports instead. Or so he says. Read more

A note from Pimco on Monday – No Free Lunch? The Real Impact of Lower Rates in Brazil – is really, despite its title, about the impact of government interference in the commercial decisions of publicly traded companies.

The results, unsurprisingly, do not get a thumbs up from the point of view of investors in affected companies, primarily in the commodities and utilities sectors. And, the authors suggest, the only place to hide is in consumer plays where prices are already pretty rich. Read more

It’s a big day on Tuesday for investment banker Uche Orji and, potentially, for Nigeria’s future fiscal stability, too. Orji, who has worked at JP Morgan, Goldman Sachs and most recently UBS, in New York, starts on Tuesday as CEO of the Nigerian Sovereign Investment Authority.

His job will be to establish and manage the country’s proposed $1bn sovereign wealth fund, which is meant to safeguard some oil revenue for later use. Given the many billions of petrodollars squandered or stolen by senior officials in recent decades, few dispute that the SWF is a good idea. But it has not been welcomed by all. Read more

By Peter Attard Montalto of Nomura

Investors in South Africa have always had a difficult time reconciling a bearish long-run picture with at times short-run bullish dynamics. We are in just such a situation at the moment. On the positive side we have an economy that is feeling the effects of the eurozone crisis and slowing but retaining enough momentum to prevent a recession, a fiscal consolidation path that is broadly credible, and a financial system that is sound and sheltered from the troubles of its global peers, plus a credible central bank.

But underneath is a long-run potential growth rate at 3.75 per cent – far too low to reduce the endemic structural unemployment issues (‘real’ joblessness is around 38 per cent) and being kept that low by a mixture of policy and politics. The potential for long-run social instability is therefore a key issue, and one that the rating agencies have been paying close attention to. Read more

Investors are betting that Georgia’s parliamentary elections on Monday won’t harm the country’s economic prospects.

There’ve been some ugly campaign exchanges between leaders of president Mikheil Saakashvili’s ruling UNM party and the opposition Georgian Dream of billionaire businessman Bidzina Ivanishvili.

But, as the chart below suggests, international fund managers are taking it in their stride: they expect UNM to win and Georgia’s business-friendly policies to stay in place. Read more

* China manufacturing remains sluggish

* Asia’s Vulnerabilities Show

* Xstrata deal close after move on pay vote

* China fears undermine commodity currencies Read more

Indonesia’s central bank is likely to keep interest rates on hold at a record low next week, after inflation figures came in slightly lower than expected and the trade balance moved back into surplus.

Consumer prices rose by 4.3 per cent on an annual basis in September, according to government data released on Monday, lower than the 4.6 per cent average forecast from economists polled by Bloomberg. Read more

Monday’s picks from the BB team: Syrian rebels learn patience; Erdogan’s long goodbye; Colombian shale gas tussles; and the Chinese and Indian middle class. Plus: Slavophiles versus Westernisers; China’s property bubble, again; and what the ANC membership tells us about South Africa’s future.
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Privatisations in Romania have acquired something of a reputation for controversy and confusion. The latest, the urgent sale of chemicals maker Oltchim, has all the hallmarks: a loss-making state enterprise, international pressure for a rapid deal, a controversial tycoon (pictured), maladroit government handling of the case, and now serious doubts about the company’s future.

As of early Monday, Oltchim’s fate hung in the balance. Read more

A slew of PMI numbers for Asia, and precious little sign of economic recovery in any of them.

For the bulls there’s the crumb of comfort that there were no unexpected shocks in the figures. But for bears there was much more to chew upon – with factories in China and elsewhere struggling in the face of weak export demand from the US and Europe.

East Asian markets were mostly closed for a holiday. Those that were open, including Jakarta and Mumbai, drifted lower in cautious trading. Read more

India’s economic performance has remained subdued over the past two months, with manufacturing flat, exports down, and the trade deficit up. Again.

The purchasing managers’ index for India stayed steady at 52.8 in September, the same as August, according to HSBC and Markit. Meanwhile, Indian exports fell 9.7 per cent, to $22bn, in August, while imports fell 5.1 per cent, to $38bn, producing a $16bn trade deficit, according to government data. Read more

There is a big disconnect between the gold price and the share prices of gold producers – especially those of South African producers. The metal has proved to be a far better bet than the miners.

Now with South African platinum producers forced into paying higher wages, and the industry maturing, will platinum go the same way? Chart of the week takes a look. Read more

* China manufacturing remains sluggish

* Xstrata deal close after move on pay vote

* Trade slows around world Read more