Emerging Markets Radar (July 8, 2013)
- 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.
- China’s State Council issued a statement to stabilize growth after the interbank liquidity crunch in June. The statement said China is not tightening, but not easing either. Rather, it said for the People’s Bank of China (PBOC) to use quantitative tools to maintain an appropriate level of money supply in the open market. The statement came after the government realized a transparent and gradual approach in its monetary policy should be used to avoid market disruption. The government also provided clarity on the first-time home buyer policy where supportive lending will be continued, as opposed to recent reports that said the government was going to tighten mortgage lending. The statement also mentioned specifically that the monetary policy will support advanced manufacturing, strategic emerging industries, IT, labor intensive industries, services and environmental protection industries.
- China’s overnight interbank rate dropped to 3.38 percent from the recent peak of 11.7 percent last week, after the PBOC injected liquidity and the State Council provided clarity for its monetary and fiscal policies. In spite of intensified GDP growth downgrade by brokerage firms after interbank liquidity turmoil a week ago, a State Information Center report believes that second-half GDP growth can achieve 7.6 percent.
- China raised the natural gas wellhead price by 15 percent for existing volume and 20 percent for incremental volume. The policy will help exploration and production companies invest more on upstream projects and increase gas supply. It also will be positive to the downstream gas distributors in the long-term due to increased pipeline supply.