Emerging Markets Cheat Sheet (June 6, 2011)
Strengths
- Macau’s casino gaming revenue rose 42 percent from a year earlier and 18.5 percent from the prior month, to 24.3 billion patacas ($3 billion) in May. In the first five months of 2011, casino revenue reached 103.3 billion patacas ($12.8 billion), representing a year-over-year growth of 43 percent.
- Hong Kong’s retail sales jumped 28 percent year-over-year in April, higher than market expectations and accelerating from March’s 26 percent. The latest gain was the highest since August 1991, driven by surging mainland Chinese visitors and the improving local labor market.
- China’s official manufacturing Purchasing Managers Index, albeit slowing from April’s 52.9, exceeded market estimates with a 52 reading for May, in spite of unfavorable seasonality, worsening power shortages, and accelerating inventory destocking.
- Polish economic growth remained near the fastest pace since 2008 as private consumption grew more than forecast and investments recovered. GDP expanded an annual 4.4 percent in the first quarter, as the economy grew one percent from the previous quarter.
Weaknesses
- South Korea’s industrial production growth decelerated to a worse-than-expected 6.9 percent year-over-year in April from 9 percent in March, reflecting repairs at petrochemical plants and shortages of electronic parts in the wake of the Japanese earthquake.
- Thailand’s central bank raised the benchmark interest rate by 25 basis points to 3 percent, the fourth hike in 2011, despite deteriorating exports, industrial production, and capacity utilization.
Singapore’s manufacturing Purchasing Managers Index eased to a lower than expected 50.8 in May from 52.5 in April, led by weakness in the electronics sector at least partially affected by the Japanese supply chain disruption.- Headline CPI in Turkey rose by 2.42 percent in May, compared to April, above consensus expectations. The components show that the deviation came from food prices, up 4.7 percent. This chart shows year-over-year changes in inflation.
Opportunities
- According to China Internet Network Information Center (CNNIC), more than 35 percent of China’s 859 million mobile users surf the internet on their mobile devices as of 2010, thanks to the completion of the 3G wireless network and expansion of smartphones. The share is expected to reach almost 50 percent by the end of 2011, and more than 80 percent in 2014. To put these numbers in context, a total of 750 million mobile internet users are estimated for China by 2014, the equivalent to the entire population of two U.S.’s and one Japan. Mature dotcom companies in China should be among the major beneficiaries of this trend, as they can transfer their knowhow in internet content and services to mobile applications.
- Turkish utilities continue to expect power consumption growth to surpass the country's GDP development by 1 to 2 percent going forward. (The Merrill Lynch macro team forecasts 6.4 percent and 4.0 percent GDP growth in 2011 and 2012, respectively.)
Threats
- Lingering scandals on corporate governance issues of select Chinese companies listed through reverse mergers may negatively reinforce investor bias against non-state-owned Chinese companies traded outside of China.
- According to Roubini Global Economics, a rate increase in the new social contribution tax in Russia may have caused a spike in "informal" employment and wages, which could explain acceleration in retail sales amid stagnant real wage and disposable income growth.
