China reserves: now that’s what we call spending power
Let's take the whole lot
The latest leap in China’s forex reserves takes the total to $3.44tn. That’s more than the next four biggest stockpiles combined – in Japan, the eurozone, Saudi Arabia and Russia.
The number is so large that it’s hard to understand. So, to put things in perspective, beyondbrics went shopping. Continue reading »
Egypt reserve decline: trouble ahead
A fall in Egyptian foreign exchange reserves in January might have been expected, but not this big. The drop of $1.4bn to a 15-year low of $13.6bn, announced by the central bank late on Tuesday, pushes the country closer to economic collapse.
The December foreign exchange reserve levels of $15bn were considered sufficient to cover only three months of imports – which the central bank in December called “minimum and critical levels” – and if it wasn’t already, the necessity of securing additional foreign assistance is now urgent. Continue reading »
Chart of the week: EM fx reserves
By Rob Minto and Valentina Romei
The relentless rise in foreign exchange reserves in emerging markets isn’t so relentless after all. After years of accumulation, emerging markets are not stockpiling the dollars as they once were.
Currency depreciation worries, slowing exports, a possible end to the commodity supercycle – there are various reasons why overflowing reserves might hold less appeal. But some countries are bucking the trend. Chart of the week looks at which ones, and why. Continue reading »
AllianceBernstein: slowdown in foreign exchange reserves growth signals end to cheap money flows into EMs
Could emerging market borrowers’ appetite for cheap developed world credit be finally easing?
A slowing of the huge growth in the EM’ foreign exchange reserves could point in that direction. So says Lars Pederson of fund manager Alliance Bernstein who says demand for foreign credit could be weakening because of concerns over possible local currency depreciation, worries about accumulated foreign debt holdings and a lack of suitable investment projects. Whatever the reasons, the easy money party is nearly over. Continue reading »
Egypt: stocks fall as Mursi challenges the generals over parliament
Source: Egyptian Exchange
Egyptian president Mohamed Mursi’s brief honeymoon with the markets seems to be over.
Egyptian stocks, which rallied on his election only two weeks ago, plunged 4.5 per cent on Monday, wiping out nearly a third of the gains of the gains made since June 24 when Mursi was confirmed as the country’s first democratically-elected leader. Continue reading »
China’s FX reserves: the coming peak
Is the sky the limit for China’s foreign exchange reserves? Apparently not. After years of exponential growth, the towering pile of Chinese reserves may finally be close to hitting the ceiling.
Nomura has called the top: $3.68tn at the end of 2014, up from a mere $150bn at the start of 2000. China’s reserves will then start to decline, albeit gradually, in 2015. Continue reading »
PDVSA eyes $3bn issue
Hugo Chavez’s management of Venezuela’s economy may be a trifle unorthodox – to put it kindly – but there’s no doubting he has some competent technocrats on his economic team.
Whether the socialist leader pays any attention to his market-savvy advisers is another matter, of course, but this time it looks like he might have: the timing of a forthcoming debt issue could hardly be better. Continue reading »
Egypt: reserve fears ease, for now
Some relief for Egypt’s battered foreign currency reserves, which have plunged 57 per cent since the start of the uprising to overthrow former president Hosni Mubarak last January.
Net reserves fell in February, down by $680m, but that’s a significant slowdown from the average $1.8bn monthly decline recorded in the five previous months. It raises hopes that the flight of hard currency from the troubled country may be slowing as the prospects rise of a deal with the International Monetary Fund. Continue reading »
China ditches the dollar (sort of)
China has earned a reputation as a hypocritical investor over the past few years. It has repeatedly warned the US that quantitative easing was debasing the dollar, only to turn around and plough even more of its vast foreign wealth into dollar-denominated assets.
But perhaps those warnings weren’t so hollow after all. The latest data from the US Treasury suggests that China has in fact executed a major diversification away from the dollar. Continue reading »
YPF dodges the bullet…for now
YPF dodged the bullet – for now – as Cristina Fernández, Argentina’s president, defied expectations and announced no investor-scaring moves to seize influence, control or even renatinalise the former oil monopoly.
Shareholders, who had seen millions wiped off their shares in recent weeks as prices fell off a cliff on the speculation that an investor-unfriendly move was in the offing, were rewarded with their highest rise in a decade – a 17 per cent bounce on Thursday, which followed Wednesday’s 15 per cent fall. Continue reading »
Fitch: reconsidering Russia
By comparison with the swathe cut through eurozone credit ratings by Standard and Poor’s, it was nothing.
But Fitch’s decision on Monday to switch from positive to stable on Russia is worth noting. It shows that even a country with $500bn in foreign reserves can’t afford to take the markets for granted when protesters are in the streets demanding the end of the rule of Vladimir Putin. Continue reading »
Turkey: rebalancing, slowly
Turkey’s mammoth balance of payments deficit is on the way down – at least by some measures – but there is still a long, hard road ahead if the country is to resolve its financing difficulties.
Central bank data released on Wednesday showed a current account deficit for November of $5.2bn, in line with market expectations. That was more than October’s tally of $4.2bn, but less than November 2010’s level of $6bn, so bringing down the country’s rolling 12 month deficit for the first time in two years. Continue reading »
Egypt: calm voting soothes markets
After a week of dire predictions and market turmoil, Egypt’s equity markets saw their biggest single day rise in almost two years on Tuesday. The benchmark EGX index jumped 5.5 per cent as two days of peaceful polling gave investors hope that a new government could be formed and power transferred smoothly from the ruling military council.
But Egypt’s economy is not out of the woods yet and Tuesday’s equities gains did little to reverse the 43.5 per cent fall the EGX index has suffered this year. Voting continues for the next six weeks – surely a stern test of investors’ nerves. Continue reading »
Egypt hikes rates as reserves dwindle
Egypt hiked its key interest rates on Thursday – an unorthodox move given that inflationary pressure is easing and growth remains sluggish. So what is forcing the central bank’s hand?
The answer, Capital Economics argued, is Egypt’s deteriorating reserves position and the intensifying pressure on the Egyptian pound, which the central bank has been trying prop up by intervening in the FX market. Continue reading »
Egypt downgraded by S&P
In a move that will shock no one, Standard & Poor’s has downgraded Egypt for the second time in five weeks. S&P lowered Egypt’s foreign and local currency sovereign credit ratings to ‘B+’ from ‘BB-’ citing renewed political turmoil and the continuing depletion of the country’s foreign reserves. Continue reading »
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