And so the fall in emerging market currencies continues. Over the past month, the third episode of taper tantrum has pushed exchange rates down almost across the board against the dollar, bringing with it the now familiar round of hand-wringing about the vulnerability of emerging economies.
Once again, however, at least as far as currencies are concerned, the latest bout of weakness falls somewhat short of full taper tantrum catastrophe. The depreciation of emerging market exchange rates looks a lot like a subset of the sharp appreciation of the dollar, which has also shot higher against the yen and the euro, than it does a weakness of the entire asset class. Read more
For the first time, transnational corporations from emerging market (EM) countries spent more on foreign acquisitions last year than companies from developed market (DM) countries, according to a study by the United Nations Conference on Trade and Development.
Led by some record breaking acquisitions by Chinese and Russian companies, EM transnational corporations (TNCs) accounted for 56 per cent of total cross-border transactions in 2013, the study found. In total the value of cross-border M&A deals – from EM and DM sources – rose 5 per cent in 2013 to $349bn. Read more
The Indian government is keen to draw investors to the country, easing FDI caps in a range of sectors over the last year and a half. But you might think recent financial instability and political uncertainty ahead of this year’s general elections would hurt enthusiasm.
However, an Ernst & Young survey of 500 international investors has found some optimism about Asia’s third largest economy. Read more
When Transparency International reported this week that a third of Taiwanese said they paid a bribe last year to get government services, it sparked some anger in Taipei.
Many question whether Taiwan is really that corrupt – equal on that measure to Indonesia, by TI’s count. But the report has hit just as the government is trying hard to spark its flagging economy by encouraging more foreign investment. This is the kind of PR it doesn’t want. Read more
Foreign investors are returning to South Korea after heavy sell-offs in January, attracted by expected foreign exchange gains with the won stregthening against the dollar.
Net foreign investment in South Korean bonds rose by Won3.53tn in February, the highest monthly increase since October 2010. Foreign holdings of local debt stood at a record Won93.7tn as of end-February. Read more
After a string of cautious statements on China from US companies ranging from Caterpillar to Yum!Foods, the American Chamber of Commerce in Shanghai has declared that the days of relentless sales and rising profits are over.
The “new normal” is one of slower economic growth, rising costs, skilled labour shortages and an increasingly competitive business environment. Tougher times “will be the rule rather than the exception in the years ahead,” AmCham says in a report. Read more
When New Delhi decided last September to permit foreign airlines to own up to 49 per cent of domestic Indian carriers, the aim was to encourage an infusion of foreign capital to help its heavily-indebted incumbent airlines strengthen their weak balance sheets – and expand their services.
But instead of a foreign lifeline, India’s air carriers are now confronting the prospect of intensified competition, after AirAsia, the Malaysian low-cost carrier, announced plans to set up a brand-new, start-up Indian carrier, with financial backing from India’s Tata Group. Read more
Net foreign investment into Indian equities for the year is set for a bumper year, despite slowing GDP, stagnant labour markets and a government plagued by corruption.
It is already above $20bn – the second highest level in five years with almost a month still to go. Last year saw net outflows. Is this animal spirits gone mad or are investors onto something? Read more
Myanmar may finally have completed its shiny new foreign investment law, after much delay. But sceptics still question whether the much-vaunted rush of foreign investment will follow.
Despite pronouncements by companies such as Coca-Cola, Nestle and GE about entering Myanmar, most deals are limited to product supply and distribution. The big western names are yet to commit serious money, let alone build factories. But at least the professional services firms are setting up shop – the latest being PwC, which this week announced the opening of a Myanmar office. Read more
Indonesia should consider revamping its corporate governance standards in the wake of the Bumi affair.
Even though the case involves a dispute among private shareholders, the government must tread carefully because the affair is seen as “a bad precedent” for the country.
That’s the view of Chatib Basri, chairman of the government’s investment coordinating board, (pictured) who told beyondbrics of his concern about Bumi’s impact on the investment climate. Read more
Hyundai Heavy Industries has won a $3.2bn contract from Saudi Electricity Company to build an oil-fired thermal power plant in Jeddah by 2017.
The turnkey project is important for both parties. Hyundai Heavy needs to make up for business lost in other sectors, notably shipping, and in other regions in the global economic downturn. And Saudi Arabia is using its oil revenues to boost the economy in an attempt to stave off any risk of the social unrest in surrounding Arab states. Read more
Gold diggers beware! The World Bank is setting up a trust fund to give African nations some muscle when dealing with foreign investors in the extractive industries. The $50m fund is driven by concerns that African governments are allowing the natural wealth of their country to be chipped and siphoned away, with little benefit to local people.
Recent strikes in South Africa have left foreign investors wary of putting money into African mining. Further challenges won’t be welcome. Read more
By Roberto Herrera-Lim of Eurasia Group
Foreign investors are again kicking the tyres of the Philippine economy, and with good reason. During the first half of the year, the economy, one of Asia’s consistent underperformers, expanded by 6.1 per cent from a year earlier. Only China and Indonesia grew faster in Asia. Resilient remittances from the country’s army of workers located across the world from the Middle East to North America have fueled domestic consumption.
This leads to the most important question foreign investors face when now looking at the Philippines: Are things really that different, or is this simply a matter of good fortune? Read more
Despite glowing predictions of becoming a “rising star” in Asia, Myanmar has generated more uncertainty than optimism when it comes to its much-delayed foreign investment code.
The saga has dragged on for more than eight months, since president Thein Sein promised a liberal new foreign investment regime late last year, and his industry minister (who also heads the Myanmar Investment Commission, the body overseeing foreign investment) just weeks later announced key points at the World Economic Forum in Davos. Read more
By Khoonming Ho of KPMG
Circular 30, recently issued by China’s state administration of taxation (SAT), is a very positive development for foreign investors in China, bringing tax relief on dividends for many foreign investors.
The new rules don’t reduce the domestic Chinese withholding tax rate on dividends for foreign investors, which remains 10 per cent. But, foreign investors that hail from countries covered by relevant tax treaties, the new regulations have made it easier to obtain tax treaty benefits and bring down the withholding tax rate on dividends to as little as 5 per cent. Read more
It sounds ominous when the company planning one of the biggest investments in a country’s history says it is watching developments closely.
But here is what Rio Tinto Alcan has said about the impact of Paraguay’s unfolding political crisis on its plans to build a $4bn aluminium smelter. Read more
Are European companies falling out of love with China?
Some are, as they are faced with arbitrarily implemented regulation and rising labour costs. But most are happy to stay, as long as the downside of doing business in China is offset by growth and profits. That is the conclusion of the business confidence survey released on Tuesday by the European Union Chamber of Commerce in China. Read more
Bosch, the German car parts maker, has confirmed plans to go ahead with a €77m plant in northern Romania, in a move which will give the new government in Bucharest a bit of a boost.
The investment in the city of Cluj-Napoca will bring 340 jobs in the production and development of automotive electronic controls near a site where Nokia closed a showcase plant last year. Good news for a country struggling to avoid recession. Read more
Foreign investors breathed a sigh of relief on Monday as India’s finance minister announced that the government would delay and water down a finance bill provision that could have closed off Mauritius as a tax haven.
But any investor celebration was coloured by the fact that India has once again reversed itself on a major policy, injecting further uncertainty into an environment that has already had its fair share. Read more