Emerging Markets Radar (November 21, 2011)
Strengths
- China’s foreign direct investment growth accelerated to 8.8 percent year-over-year in October from 7.9 percent in September, as the country’s competitive labor productivity and public infrastructure continued to attract multinationals.
- Indonesia sold $1 billion 7-year Islamic bonds at a yield of 4 percent, less than half of the yield in its 2009 sale and 200 basis points lower than Italy’s, as the country’s credit quality continued to improve toward investment grade.
- Malaysia’s third quarter GDP growth surprised on the upside at 5.8 percent year-over-year, accelerating from 4.0 percent in the second quarter, driven by commodity exports and domestic investments.
- Colombia’s current account deficit, which is 3.4 percent of GDP, has been largely financed by foreign direct investment rather than portfolio inflows.
Weaknesses
- Growth in Philippines’ overseas workers remittance, which accounts for around 10 percent of GDP, slowed to 8.4 percent year-over-year in September from 11.1 percent in August, and led by intensifying European crisis.
- Hong Kong’s unemployment rate rose to 3.3 percent in October from 3.2 percent in September, which is the first increase in six months, as volatile global markets started to affect business sentiment and corporate hiring plans.
- Singapore’s non-oil domestic exports declined by a larger-than-expected 16.2 percent year-over-year in October—the deepest slide in 30 months—as electronics shipments contracted 31.2 percent from a year earlier due to dampened demand from Europe and the U.S.
- Central and Eastern Europe’s economic outlook worsened in November as the euro-area debt crisis undermined growth prospects in Turkey and Poland. The growth will slow to 2.5 percent next year, according to the International Monetary Fund.Opportunities
Opportunities
- According to McKinsey’s 2011 Annual Chinese Consumer Survey, 91 percent of Chinese consumers receive product information from TV commercials, and only 28 percent from internet advertisements, a far cry from the 73 percent penetration of internet advertising in the U.S. Tremendous growth potential of online advertising, coupled with China’s plan to spend RMB 1.6 trillion through 2015 on broadband network infrastructure, should benefit established internet companies in China.
- Hungary’s government has started negotiation on an agreement with the International Monetary Fund and the European Union, according to the Economy Ministry in Budapest.
Threats
- In October, new home prices dropped in 34 out of 70 major cities in China on a month-over-month basis, and existing home prices witnessed sequential declines in 38 out of 70 cities. Average home prices registered a 0.14 percent decline for the first time this year, as a result of the continued stringent government policy dampening property and credit. Investor sentiment towards property-related sectors such as construction and materials may stay cautious.
- Headlines raised the prospect of copper and silver mining royalties in Poland. The government is looking to raise as much as 3 billion zloty under the scheme.
