Emerging Markets
Strengths
- Overseas worker remittance to The Philippines in December reached an all-time high of $1.57 billion, representing 11.4 percent growth year over year. Remittance reached $17.4 billion for all of 2009 and accounted for 10.8 percent of nominal GDP.
- South Korea’s power sales to industrial users rose 24 percent in January from a year earlier in volume terms, the fastest pace in nearly 34 years due to continued recovery in global demand for auto and steel.
- More than 180,000 net new jobs were created in Brazil in January, bringing the total for the past 12 months to about 1.3 million.
- Eastern European countries are running a tighter fiscal policy and are far less indebted than the major world economies (see chart), enabling them to grow faster than the developed countries saddled with ever-higher deficits and debt burden.
Weaknesses
- Singapore’s non-oil domestic exports in January grew at a slower than expected 20.8 percent year over year, representing a seasonally adjusted 8.9 percent decline month over month, due to a moderation in both electronics and pharmaceuticals exports.
- Thailand’s daily trading turnover has shrunk 34 percent this month from January’s average, as investors stayed on the sideline ahead of Supreme Court’s Feb. 26 ruling on whether to confiscate the former prime minister’s assets, a decision that could lead to domestic political turmoil.
- Official Argentina CPI in January reached 1 percent, bringing year-over-year CPI to 8.2 percent compared to 7.7 percent in December. However, private sector estimates of the CPI are much higher and range between 14 and 17 percent.
- Data released Tuesday by Poland reveals a deep deflation in gross wages and salary income during the month of January, defined by a single-month plunge of 11.5 percent.
Opportunities
- Walmart de Mexico in 2010 is planning to open 300 new stores in Mexico and 30 in Central America. Around 60 percent of new stores will be in the Express format to gain market share from the informal sector.
- Mexico’s National Infrastructure Fund is planning a substantial increase in its investment program in 2010. In total, 30.4 billion pesos ($2.37 billion) will be committed to 42 projects, up from 22.1 billion pesos in 23 infrastructure projects last year.
- Citigroup revised its expectations for Russian growth upwards to 6.2 percent in 2010, with two-thirds of the growth to come from household consumption. A number of indicators suggest that the recovery in consumption is already under way – there was substantial improvement in retail sales in December and real household income was up 7.1 percent in January.
Threats
- An earlier-than-expected increase of the discount rate by the U.S. Federal Reserve might help sustain the current U.S. dollar rally and prolong the unwinding of the U.S. dollar carry trade. Emerging-market equities in general are susceptible to near-term selling pressure given their negative correlation with the U.S. dollar.
- The arrest of a prosecutor in Turkey revived tension between the courts and ruling AK Party. A Financial Times article suggests that any government attempts at constitutional reform that could precipitate early elections would hit sentiment, as the recent polls suggest that AK Party could not win an outright majority.
