Emerging Markets Radar (July 8, 2013)

Strengths

Emerging Markets Selloff: Buying Opportunity
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  • Poland's purchasing managers' index (PMI) rose to 49.3 in June, up from 48.0 in May. This is the second-highest result in the current cycle of 15 readings below the 50 mark. The bigger picture is that growth in manufacturing is still bordering on contraction, but June’s PMI reading suggests it might swing into growth in the third quarter. As seen in the chart above, HSBC believes the economy has bottomed in the first half of 2013 and a gradual, though slow, recovery will follow. In addition, Poland’s central bank cut borrowing costs to a record low, cutting by 2.25 percentage points since November. The central bank indicated that the cycle of interest rate reductions was over, and the European Union’s largest eastern economy is poised to recover.
  • Mexico has approved a 10 billion peso ($772 million) credit program for the nation’s homebuilders as Homex, Urbi and Geo, the three biggest players, seek to restructure their debt after a shift in government policy depleted their cash. Despite the modest size of the financing program, which equals to just 18 percent of the 55 billion pesos of debt owed by the three biggest homebuilders, the program’s approval is a sign that President Enrique Pena Nieto enjoys sufficient parliamentary support to have his “Mexico Plan” bills passed by the legislature.

About the author

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., and a Toronto, Canada native, which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure. The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories. Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.” He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies. Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

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