Emerging Markets Highlights (week ending 02/07/10)

Sunday, February 7th, 2010

Emerging Markets
Strengths

• Hong Kong’s retail sales rose 16 percent year-over-year in December, the fastest pace in 20 months and ahead of market expectations. The growth was thanks to improving employment and a 14 percent year-over-year increase in tourist arrivals from mainland China.
• South Korea’s exports jumped 47.1 percent in January from a year earlier, the highest growth rate in more than 20 years, as the continued global recovery drove external demand for autos, appliances and electronics.
• Chile’s economic activity expanded by a higher than estimated 3.9 percent year-over-year in December, the country’s highest growth in 15 months, due to a rebound in services and retail sales.

Weaknesses

• China’s official Purchasing Managers’ Index moderated to 55.8 in January from 56.6 in December, partly due to seasonal factors.
• Fitch described Hungary’s fiscal prospect as uncertain ten weeks ahead of the country’s general elections and remained undecided whether to increase its credit rating outlook.
• Emerging market equity funds saw a $1.6 billion outflow in the week ended February 3, the biggest liquidity exodus in 24 weeks. The outflow came amid rising concerns on the sovereign debt situation in such European countries as Greece, Portugal and Spain.

Opportunities

• While China’s city population has been consistently growing in the last decade, over 40 percent of the counties in central China still have an urbanization rate of merely 20-30 percent. According to CEBM, consumer spending can be boosted by more than 45 percent when the urbanization rate rises by 10 percentage points to the 30-40 percent range. Expanded urbanization, especially in inland China, remains one of the policy solutions for stimulating domestic demand and bodes well for consumer plays in the long term.

Threats

• The current rally in the U.S. dollar may continue to be a headwind for investors in Asia given the longstanding negative correlation between the U.S. dollar and Asian equities.

Tags: Central China, China, City Population, Debt Situation, Emerging Market, Emerging Markets, Equity Funds, General Elections, Global Recovery, Headwind, Last Decade, Mainland China, Market Equity, Market Expectations, Negative Correlation, Outflow, Policy Solutions, Purchasing Managers Index, Seasonal Factors, Sovereign Debt, Term Threats, Tourist Arrivals, Urbanization Rate
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Taiwan, the Alternative China

Monday, November 16th, 2009

In the 60 years since Chinese nationalists moved to Taiwan, the country has grown up in a very different way from mainland China. Matthew Rivera reports from Taiwan on how culture, democracy and economics there offer an alternative China.

Source: MarketWatch, November 11, 2009.

Tags: China, Chinese Nationalists, Democracy, Economics, Emerging Markets, Mainland China, November 11, Taiwan China, Taiwan Culture
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What is Gold to China?

Thursday, September 10th, 2009

Telegraph UK’s Ambrose Evans-Pritchard discusses the idea that gold is now potentially a winning bet with minimized downside, now that the “Beijing Put” is on the table.

Evans-Pritchard recently had the opportunity to spend a fair amount of time with Cheng Swei, who was until recently, the Vice Chairman of the Communist Party’s Standing Committee, at the Ambrosetti Workshop, a meeting of global strategists and politicians at Lake Como, Italy.

Here is an excerpt:

Mr Cheng was until recently Vice-Chairman of the Communist Party’s Standing Committee, and is now a sort of economic ambassador for China around the world - a charming man, by the way, who left Hong Kong for mainland China in 1950 at the age of 16, as young idealist eager to serve the revolution. Sixty years later, he calls himself simply “a survivior”.

What he said about US monetary policy and gold - this bit on the record - would appear to validate the long-held belief of gold bugs that China has fundamentally lost confidence in the US dollar and is going to shift to a partial gold standard through reserve accumulation.

He played down other metals such as copper, saying that they could not double as a proxy currency or store of wealth.

“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market,” he said.

In other words, China is buying the dips, and will continue to do so as a systematic policy. His comment captures exactly what observation of gold price action suggests is happening. Every time it looks as if the bullion market is going to buckle, some big force steps in from the unknown.

Bottom line: The “Beijing Put” is part of a larger symphony of intervention that keeps the US dollar balanced. The Fed’s Quantitative Easing has made China’s participation a matter of wealth preservation.

That makes gold a very interesting trading opportunity, if not complex. This is likely to go on for quite some time. As a  longer term bet on inflation, however, gold prices rise as the real supply itself is finite. The question remains - Where will the gold come from?

Read the whole article here.

Tags: Bullion Market, Charming Man, Communist Party, Evans Pritchard, Gold, Gold Bugs, Gold Price, Gold Standard, Idealist, Lake Como Italy, Mainland China, Quite Some Time, Sixty Years, Standing Committee, Strategists, Survivior, Swei, Systematic Policy, Telegraph Uk, Unknown Bottom, Wealth Preservation
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