Emerging Markets Radar (March 19, 2012)
Strengths
- Russian industrial production rose 6.5 percent in February compared with a year earlier, the fastest pace since January 2011 and up from 3.8 percent in January.
- National Bank of Poland announced that M3 money supply rose 12.6 percent year-over-year in February, after a 13.7 percent increase in January.
- China will consolidate rare earth companies into two or three large-size enterprises, Shanghai Securities News reports, citing Miao Wei, Minister of Industry and Information Technology.
- China may resume nuclear plant approvals early this year, according to State Nuclear Power Technology Corp. president Wang Binghua. China domestic coal prices and imports may surge as railway lines shut down for maintenance, according to Commodor Research.
- China will allow exchanged-traded funds (ETFs) of Hong Kong shares to trade on the mainland exchanges “soon,” according to Hong Kong’s Secretary for Financial Services and Treasury K.C. Chan.
- From March 1-9, China’s passenger vehicle sales were 294,200 units, rising 13 percent year-over-year and 5 percent month-over-month after adjusting the number of working days, according CICC.
- Singapore’s non-oil exports surged 30.5 percent year-over-year in February as electronics and pharmaceutical shipments increased. The result was much higher than the median Bloomberg estimate of 16.2 percent.
Weaknesses
- South African retail sales growth expanded at the slowest pace in six months in January as the highest inflation rate in more than two years damped consumer spending. Sales growth eased to 3.9 percent from 8.7 percent a month earlier, a Pretoria-based Statistics South Africa said on its website this week. Inflation in South Africa was 6.3 percent in January as electricity, fuel and food prices climbed, limiting the room the central bank has to stimulate the economy as Europe enters a recession.
- China’s foreign direct investment fell for the fourth month in a row in February as companies reined in spending amid a slowdown in the world’s second-biggest economy and the prolonged European debt crisis. Investment declined 0.9 percent to $7.73 billion last month from a year earlier, following a 0.3 percent drop in January, the Ministry of Commerce said in a statement this week.
- China’s February exports rose 18.4 percent, lower than the estimate of 31.1 percent, while imports rose 39.6 percent, higher than the estimate of 31.8 percent. However, the largest trade deficit in the month was mainly due to seasonal factors and won’t be sustained, Ministry of Commerce spokesman Shen Danyang said.
- Chinese premier Wen Jiabao at a news conference after the “Two Conferences” in Beijing strongly commented that the house prices are far from being reasonable, and stated the government will maintain its property curbs.
- Korea’s February unemployment rate rose surprisingly to 3.7 percent from 3.2 percent in January, above consensus of 3.2 percent. The main reason for the higher jobless rate was the increased labor force in the month, as college students entered the labor market.
Opportunities
- Chile is said to spend more than $9 billion on water treatment plants by 2017 as mining companies boost production, a report from Raymond Philippe, a Santiago-based director for the Canadian engineering company, Hatch Group, said this week.
- HSBC, Europe’s largest bank, is looking to buy a lender in Turkey. Given the size of HSBC, buying a small bank would make little sense. HSBC would like “a meaningful investment,” according to its CEO.
- Turkey will stop charging special consumption taxes on car purchases, said Industry Minister Nihat Ergun.
- Turkey, with the biggest current account deficit after the U.S. and economic growth rivaling China, is seeking to grow its pension system as a means of sustaining economic growth without relying on more volatile foreign capital inflows. The government may double tax incentives for pension contributions this year.
- The merger between Youku and Tudou consolidates China’s online video industry, which will benefit established internet players such as Baidu and Sina. As the online video ad market grows explosively, those established platforms will compete rationally.
Threats
- India’s headline inflation picked up for the first time in five months in February on higher food costs but another measure of price pressures cooled, sparking market speculation that the central bank may surprise with an interest cut on Thursday. The wholesale price index, India’s main gauge of inflation, edged up a faster-than-expected 6.95 percent from a year earlier in February after a spike in vegetable prices fanned food inflation.
- With determination to restructure its industry, China will allow its GDP growth to touch a lower low in the first and second quarters, but the market expects it to go higher after the first half of the year.
