The Bank of Japan’s huge monetary expansion programme has raised fears of a flood of Japanese hot money among emerging markets policymakers.
But hold on, says Citigroup in a report. If flows are correctly managed, their effects could be positive: Japanese investment should make it easier for EMs to finance external and fiscal deficits and so allow faster domestic spending growth. Far from destabilising EMs, says Citi, the BoJ could help them rebalance away from exports and in favour of consumption.
It all sounds a bit optimistic. But let’s take a look at Citi’s logic. Continue reading »
There has been a sharp improvement in Turkey’s current account deficit – often cited as the biggest single point of concern for investors.
But in an FT video (below the break), Timothy Ash, head of emerging markets research ex-Africa at Standard Bank, explains to deputy emerging markets editor Jonathan Wheatley that the recent improvement is a one-off event and that funding for the deficit remains precarious. Continue reading »
In September, the Indian government announced a spurt of policy initiatives greeted by commentators as a return to the reformist zeal shown in the early days of prime minister Mohamed Singh’s eight years in power. This “big bang”, designed to re-ignite economic growth, was also expected to reawaken interest in Indian equities among foreign investors. But investor interest in some Indian companies actually plateaued after the package was announced, according to new research.
How should equity investors respond? Continue reading »
Watch out for the Fed tightening. That’s the message from the Institute of International Finance, the bankers’ club, to investors ploughing funds into emerging markets.
Speaking in Switzerland on his way to the World Economic Forum in Davos, IIF managing director Charles Dallara warned that investors had “underanticipated” sudden turns in monetary policy in the past – and might do so again. He said: “Are we adequately risk aware? Are we adequately risk sensitive?… I am not at all sure that we are.” Continue reading »
Coming to India
There will be haggling for every last Daim bar and the meatballs will be doused in chutney. There will be queues of people complaining that their furniture has arrived unassembled. And a whole new professional class will emerge – the DIY-wallas.
After months of discussions, on its second attempt, Ikea has received approval from India’s foreign investment board to open fully-stocked stores in the country. Continue reading »
The future of central and eastern Europe (CEE) rests on decisions being made beyond its borders, as a special report in Friday’s FT warns. The region relies on the eurozone for trade and investment.
But investors are recognising the fact that countries in CEE dealt with their fiscal problems especially quickly. Credit default swap spreads in Poland, the Czech Republic and Slovakia are converging with those in the core eurozone and deleveraging in CEE is more limited than in some west European markets. Continue reading »
Hold steady – the risk / reward balance is tipping. The Brics are now being termed “safe haven” markets and grouped with the UK, US and Germany.
For some time emerging markets have attracted multinational companies with the promise of higher returns. This draw used to come with higher risk – but the perception of that risk is now shifting. Continue reading »
The greater the uncertainty, the more diligence is due. Yet, private equity companies believe the detective work they do before investing in the lesser-known environment of emerging markets isn’t good enough. A more integrated approach to due diligence is required in these regions than in developed markets.
That’s the conclusion of a survey of 50 private equity firms, which highlighted the extra risks in EMs: corruption, bribery, fraud, the power of the government and an unpredictable regulatory environment. Continue reading »
India has tallied $12.5bn in foreign inflows so far this year, according to the Securities and Exchanges Board of India – more, at this point in the year, than any year but one of the last ten. That’s a rare bright spot.
But it raises a couple of important questions, addressed in recent analyst notes: when the economic picture is so bleak, why is that money pouring in? And who is doing the pouring?
The answer may just be that oldest of Indian pastimes: black money. Continue reading »
An advisory panel set up by Indian prime minister Manmohan Singh recommended on Saturday that a controversial set of tax avoidance laws be deferred until 2016, a move many thought would boost investor sentiment in Asia’s third-largest economy.
But Monday morning came, and the most the Bombay Stock Exchange’s benchmark Sensex had risen was around half a percentage point – because, analysts said, as nice as the postponement recommendation was, most investors had already assumed some sort of delay was in the offing. Continue reading »
Foreign visitors, numbering up to a million during Euro 2012, appear to have been left with an overwhelmingly positive impression of tournament co-host Ukraine. But international financial institutions look likely to need more convincing before they re-ignite their once intimate relationship with the developing nation.
Ukraine’s largest financial investor, the EBRD, has committed €7.5bn to the country since 1992, invested across 294 projects, including badly needed pre-tournament upgrades of transport in host cities Kiev and Lviv. Yet both the EBRD and IMF are calling for major political and legal reform if they are once more to step up commitments. Continue reading »
What a coincidence. Within a day of Indian prime minister Manmohan Singh taking up the finance portfolio on Wednesday, and pledging to “revive the animal spirits of the country’s economy”, the finance ministry was doing just that.
Officials announced a decision that investors had long been hoping for: the revision of General Anti-Avoidance Rules that many had blamed for foreign fund managers pulling out of the country.
But it turned out that Singh was wasn’t responsible. And his apparent efforts to distance himself from the move don’t bode well for Indian economic reform. Continue reading »
Chinese investors’ appetite for US real estate knows no bounds it seems. Alongside Manhattan penthouse apartments, commercial developments such as hotels, office buildings and warehouses have also been at the receiving end of Chinese capital.
According to Real Capital Analytics, mainland Chinese investors poured $1.1bn into US commercial property in 2011, more than six times the $16.6m invested in 2008. Continue reading »
“No one in their right minds” will invest in Argentina now, after the government moved to nationalise YPF, expropriating 51 per cent of shares in the Spanish-owned company. That was the view of Felipe Calderón, Mexico’s president earlier this week.
And yet four days after Cristina Fernández, Argentina’s president, announced the YPF swoop, the man she has installed at the helm of the company was in Brasilia talking to Petrobras, the Brazilian state oil company, to drum up new deals together. Continue reading »
By Samantha Pearson and Joe Leahy
There’s nothing like a friendly sheikh in the Gulf to solve your money problems.
Brazil’s richest man, Eike Batista, announced on Monday that Mubadala, an investment arm of the Abu Dhabi government, is to invest $2bn in his EBX group. In return Mubadala will get a 5.63 per cent stake in EBX’s investment vehicle. Continue reading »