Emerging Markets Cheat Sheet (January 10, 2011)
Strengths
- Macau’s casino revenue surged 66 percent on a year-over-year basis in December to $2.4 billion, thanks to higher-than-average spending by an increasing number of tourists from mainland China.
- Taiwan’s consumer price index (CPI) unexpectedly slowed to 1.25 percent in December as food price increases moderated, down from 1.52 percent in November.
- Car sales in Brazil grew 16 percent in December, following an 8 percent increase in November. Even more impressive is the 30 percent increase on a year-over-year basis. The increase was brought about by low unemployment and availability of credit.
- Chile’s index of economic activity grew by 6.2 percent year-over-year in November versus an expectation of 5.3 percent.
- Walmex same-store-sales in December increased by 3.7 percent as revenue rose 24 percent for the year.
- Hungarian and Czech industrial output rose more than economists estimated in November on increased demand for the countries’ exports. Hungarian production advanced 14.5 percent from a year earlier, the fastest in three months. Czech output rose 15.9 percent, the most in six months.
Weaknesses
- China’s official manufacturing Purchasing Manager’s Index moderated to 53.9 in December from 55.2 in November. This was the first decline in four months as both new orders and employment deteriorated.
- Indonesia’s CPI rose a higher-than-expected 6.96 percent year-over-year in December. Rising prices for unprocessed foods, due to supply disruptions caused by rainy weather, pushed CPI to its fastest pace in 20 months.
- Poland cemented its position as a leader when it comes to the use of European funds, according to Gazeta Wyborcza. In 2010, the government spent 35.7 billion zloty, exceeding the EU’s annual budget by almost 9 billion zloty. Under this accelerated schedule, most of the 15 billion euro from assistance to Poland from 2007 to 2013 has already been spent.
Opportunities
China plans to expand the length of its high-speed rail network from 8,358 kilometers (km) in 2010 to 16,000 km by 2015. The expansion of the entire national rail length, from 91,000 km to 120,000 km within the same timeframe, should bode well for construction materials such as steel and cement going forward.- Starting from this year, China will expand the pilot program nationally to allow domestic exporters to keep foreign revenue in overseas banks, instead of conducting a mandatory exchange into the local currency with the Chinese central bank. This may help correct the longstanding automatic money creation mechanism by the central bank and boost operating efficiency of exporters, as the country’s foreign reserve gradually shifts to the private sector over the long term.
- Ukraine increased the size of the quota for wheat exports for March from 500,000 tons to 1 million tons and the quota for corn exports from 2 million tons to 3 million tons. This boosts Ukrainian agricultural companies that have eagerly awaited export licenses on the updated quotas.
- Romania’s leu may rise versus the euro in the first quarter after the country met the terms of its bailout loan and will probably secure a new International Monetary Fund (IMF) accord, ING’s Groep NV said.
Threats
- There are more signs that inflation is spreading across the emerging markets universe. Colombia’s CPI in December reached 0.65 percent month-over-month, versus the expected 0.3 percent. This brings the full year CPI to 3.2 percent. The Central Bank target was below 3 percent and the figure raises the prospect of interest rates tightening as early as the first quarter.
- Facing strong economic momentum and inflationary pressures of its own, Peru unexpectedly raised interest rates yesterday by 25 basis points to 3.25 percent.
- Poland may impose a special tax on banks as early as this year, setting up a rescue fund for lenders. Poland would follow Hungary, the only central European country to implement special taxes on selected industries, including finance, energy, retail and telecommunications.
