Emerging markets are so over. So says Lawrence Summers – you can read beyondbrics’ take on his theory here – and so says Anders Aslund, in a paper published by the Peterson Institute, titled Why Growth in Emerging Economies Is Likely to Fall.
Another body blow to the catch-up theorists. What’s the argument this time? Continue reading »
Do you bet on two baseball players who are on a lucky streak? The law of averages says no: in the long run, both players will revert to their mean scores.
By the same rule of thumb, Larry Summers says that economists should not expect India and China to grow significantly above their long-term average of 2 per cent per capita. (Anders Aslund has a similar argument – which beyondbrics examines here.) Continue reading »
Greece is being relegated from a developed to an emerging stock market. Lex’s Oliver Ralph and Joseph Cotterill discuss whether Greek stocks are worthy of being treated as emerging with the country’s poor expected growth outlook.
There's another side
Beyondbrics readers will be well aware of the threat that a tighter US monetary policy poses to emerging markets. Mere hints of higher rates and a tapering of bond-buying caused EM currencies to drop earlier in the year.
But there is another side to the coin, not often noted. Rates will only rise when the US economy recovers (that is, when unemployment dips below 7 per cent under the Fed’s current plans).
A sturdier US economy will help some EMs that export great volumes to the US, as well as hurt them – from higher rates. Continue reading »
Let's go shopping
We have a new class of customer in town, or in India at least – the “closet consumer”.
India accounts for just 1-2 per cent of the global market for luxury but this is set to rocket thanks to a newly wealthy section of the population, according to a new research from the Confederation of Indian Industry and IMRB International, the market researchers. Continue reading »
The MSCI, the US company from which beyondbrics gets its definition of an emerging market, today issued revisions to its EM equity index.
Three Greek banks have been added to the index; two Moroccan banks and Maroc Telecom have been removed. (As of November, Greece is classed as an emerging market, and former EM Morocco is a frontier market.)
One big change hasn’t happened though – which will puzzle some commentators. South Korea is still deemed an emerging market. Continue reading »
Which country has the right ideas about the economy and jobs? The US, says an overwhelming number of citizens in emerging markets.
Yes – the country with a ballooning debt, political gridlock and a plentiful supply of the unemployed was chosen over China and the EU as a country with the “right ideas”.
More than a third of Brazilians polled by Ipsos Mori, and over two fifths of Indians and Mexicans said their countries should copy the US. Many South Koreans and South Africans think similarly. Continue reading »
Emerging market stock is cheap these days. According to cyclically adjusted price to earnings (Cape) valuations favoured by the recently laurelled Robert Shiller, EM equities look like a bargain in historic terms.
At the end of August, EM stock had a Cape ratio of under 17, compared to a long-term average of about 26.
This takes no account of the differences between emerging economies, of course, but it is at least interesting. Valuations are nearing those of dirt-cheap European stock, which has a Cape ratio of under 15, compared with a long-term average of about 21. Continue reading »
When index provider MSCI reclassified Greece as an EM back in June, there were a mixture of jokes doing the round about “submerging” rather than “emerging”.
Fair enough. On Thursday, S&P Dow Jones Indices agreed, moving Greece down to EM as well. But what’s the actual implication? What stocks will be included? Continue reading »
The real problem for EM assets is illusion of abundant liquidity, writes Gillian Tett.
But this image may be dangerously illusory, some policy makers fear, as one of the little-noticed ironies of the 2013 financial system is that there may now be fewer – not more – shock absorbers in the markets than there were before 2008. Continue reading »
Britain: quite safe, actually
Monday’s storm in southern England may cost insurers around $500m, and the economic impact will be greater still. But for all the media’s headlines about killer storms and more chaos to come, London will be relatively untouched by the flux in weather for the near future.
In fact, London and Paris are the only cities facing a “low risk” from the impacts of climate change, according to a new report from Maplecroft, a risk consultancy. For cities at greater risk, look elsewhere. Continue reading »
Research by Harvard’s Ricardo Hausmann has found that Mexico, Zimbabwe and Egypt are well-positioned to grow. Qatar and Brazil are less well-placed, while China risks recession. In part two of a discussion with John Authers, he explains his unexpected predictions.
By Luke Smolinski and Pan Kwan Yuk
Coca-Cola and Pepsi are known for their cheery attitudes to the world. Their slogans include: “open happiness”; “life tastes good”; “the best drink created worldwide”.
But these days, life is tasting a lot less sweet for the two drinks giants as both struggle with waning growth in key emerging markets. Continue reading »
There is much worry among emerging market investors – and policy makers – that it is 1997 all over again. EM currencies have plunged since May. Investors have piled capital into these countries since 2008 and some now fear capital will rush the other way.
Is it 1997 redux? Not in East Asia, according to the World Bank’s East Asia And Pacific Economic Update: most economies here “are in a relatively strong position to face this shock, with significantly lower vulnerabilities than in the run-up to the 1997–98 Asian crises”. Continue reading »
The IMF’s latest World Economic Outlook makes pretty grim reading for emerging markets. The Fund has cut half a percentage point from its projection for overall EM growth for 2013, and 0.4 percentage points off its 2014 forecast – they are now 4.5 and 5.1 per cent, respectively.
And it’s not all China. The big downward revisions for 2013 are India (-1.8 percentage points), Mexico (-1.7), and Russia (-1.0). But the real meat of the IMF’s report is a big section entitled “What Explains the Slowdown in the BRICS?”. The answer isn’t very pretty. Continue reading »