- China’s exports rose a stronger-than-expected 17.7 percent in December from a year earlier, the first positive growth since October 2008, and imports surged 55.9 percent. While low base effect from last year cannot be ignored, December’s nominal import value of $112.3 billion was a record high, and China overtook Germany as the world’s largest exporter in 2009 for the first time.
- China’s total vehicle sales jumped 46 percent year-over-year to 13.6 million units in 2009, surpassing the U.S. as the world’s largest auto market. Passenger car sales surged 53 percent year-over-year to 10.3 million units.
- Prices of billet exported from the Commonwealth of Independent States region have risen substantially over the past week, as trading activity resumed following the winter holiday period, according to Morgan Stanley research. Transactions are taking place at $450-455/ton, with demand coming mainly from the Far East and Middle East.
Weaknesses
- China unexpectedly raised the required reserve ratio for large banks by 50 basis points to 16 percent, effective January 18, reflecting government’s concern over excess liquidity and rapid asset price inflation, especially in real estate.
- Following a 5.6 percent inflation reading, the Hungarian Central Bank is likely to slow the pace of rate cuts. Hungary’s economy will remain in recession until the second half of the year on the back of tight fiscal policy and still high borrowing costs
Opportunities
- Sharper than expected recovery in China’s exports and rising inflation expectation domestically may prompt the country’s policymakers to allow the Chinese currency to resume appreciation against the U.S. dollar, a measure consistent with the government’s policy priority to boost consumption going forward. Among major beneficiaries of a stronger yuan will be industries related to outbound tourism including airlines and online travel reservation companies.
- Russian GDP contraction is estimated to decelerate to -5.3 percent in the fourth quarter compared to -9.8 percent in the third quarter. The beginning of economic recovery as well as the base effect means a substantial upside to 3-4 percent growth estimate in 2010.
Threats
- Chinese authority has been increasingly vocal about soaring real estate prices in top tier cities, especially in new, higher end residential properties, and more restrictive policies are likely to be applied to the physical property market. Chinese developers focusing on luxury products may be impacted the most.
- Rising commodity prices threaten to bring an end to the impressive improvement in Turkey’s non-energy current account balance. The current account deficit rose in November to $13 bln from $11.8 bln in October, as non-energy account surplus shrunk to $13.1 bln from $14.2 bln, according to Citi.
