Emerging market (EM) economies are rebounding from an export malaise that has marred their fortunes since early 2012 and rendered several of them vulnerable to the tapering of US monetary stimulus.
So, is an EM export boom now once again in prospect?
The answer, say analysts, varies sharply according to which side of a stark dichotomy each emerging market falls. Manufacturing-led exporters, particularly in Asia, are riding a wave of resurgent demand from the US and Europe. But commodity-orientated exporters in Latin America and Africa are hurting from the slow expiration of the commodity supercycle. Read more
By Michael Power of Investec Asset Management
The Brics acronym has captured investors’ imagination like few others. But has it really helped us understand the intrinsic nature of the risks and rewards in the emerging market (EM) asset class, thereby allowing us to profit from investing in it? I have long had my doubts and recent turmoil in the asset class has only confirmed them. So is there a better way of understanding this asset class? My conclusion is that we should move away from the prism of Brics – and indeed some of the other acronyms now flavouring this alphabet soup – and instead think of EMs in terms of blocs.
There is a pressing need to do this: the paradox of investing in EMs is that whilst the structural case for doing so is overwhelming, it remains an asset class that is still both cyclically risky and very volatile. This suggests the right question to ask is no longer “whether” to invest in EMs, but “how”. And in answering this “how”, we must above all acknowledge that not all EMs were born alike. Read more
Nomura has released its Global Annual Economic Outlook for 2014, and its prognosis for Asia is interesting.
The investment bank states that the region’s economic leaders for the coming year will be: Korea, Malaysia and (despite a devastating typhoon) the Philippines. Read more
South Africa’s central bank delivered a nasty shock on Tuesday morning: the country’s trade and current accounts were in a worse state at the end of 2012 than previously realised, and they were precariously funded.
The rand moved sharply, falling from 9.04 to the dollar at the open to as low as 9.21, before recovering to about 9.18 at 10.15 GMT. Read more
It’s the exports, of course. Korea’s current account registered a record surplus of $6.88bn in November, up from $5.78bn in October, and beating July’s previous record of $6.14bn.
The trade strength pushed the won to appreciate around 0.45 per cent against the dollar on Friday, at around 1,067.6 per USD, continuing the rally from May. Read more