Emerging Markets Radar (June 17, 2013)
- The rise in U.S. government bond yields that has threatened to reverse fund inflows into emerging markets is likely to prove as a red herring, according to BCA Research. With emerging market economies now surpassing 50 percent of world GDP, their higher savings rate will eventually cap any further increase in safe-haven bond yields. Although the higher savings rate does not fully eliminate the risk of weakening global growth, it does provide a floor for emerging market fund outflows.
- Both the Chilean and Peruvian central banks left their benchmark rates unchanged this week. As commodity, export-driven economies both nations continue to face challenging external conditions amid weaker global demand. However, their domestic consumption growth continues to be resilient, and continues to support their expected economic growth levels for this year; 4.5 percent for Chile and 6.3 percent for Peru.
- Malaysia’s industrial production rose 4.7 percent year-over-year in April, more than three percentage points higher than expected and the first month-over-month increase since November, as demand from domestic infrastructure projects helped offset sluggish export growth.
- China’s inflation-adjusted retail sales growth accelerated to 12.1 percent in May, the fastest pace year-to-date, as the impact from the leadership’s anticorruption efforts was limited beyond catering, tobacco and liquor. Sales of gold, silver and other jewelry gained 38.4 percent in May from a year ago.
- Despite the past two weeks’ sell-off related to Federal Reserve tapering fears and a rebound in Japanese yen, the Philippines experienced the mildest foreign outflows within Southeast Asia and maintained a strong year-to-date inflow of $1.5 billion.
- Russia and Brazil have seen the share of labor compensation as a percentage of GDP increase over the last decade, thus negatively impacting corporate earnings. It is worthwhile mentioning that most emerging markets have actually seen the share of labor income in GDP fall over the same period, giving way to higher corporate profits.