Emerging Markets Radar (September 10, 2012)
Strengths
- China’s NDRC announced city subway projects worth RMB 8.4 trillion, and highway and port projects worth RMB 1.2 trillion.
- Hong Kong August home sales rose to HK$39.7 billion from HK$31.77 billion in July.
- The government of Thailand is moving forward with next season’s rice-pledging program, which proposes Bt405 billion to buy rice. Inflation in Thailand was steady in August, up 2.69 percent versus 2.73 in July.
Weaknesses
- China’s August PMI was 49.2 versus the estimated 50, which indicates that the economic activities are contracting. HSBC’s final August flash China PMI was 47.6 versus previous 49.3.
- Taiwan and Philippines both saw their August inflation spike due to summer floods, which caused shortage in many consumer goods.
- Malaysia exports in July were down 1.9 percent versus the consensus up 3.5 percent. Exports in July were up 5.4 percent. The Malaysia central bank left the benchmark interest rate unchanged at 3 percent this week.
- Thailand also left its policy benchmark interest rate unchanged at 3 percent this week.
Opportunities
- As the chart below shows, the China region still has high potential for further smartphone penetration, which will bring about many business opportunities for internet and smartphone suppliers.
- Russia’s Bazhenov foundation, which lies just below conventionally producing layers is holding anywhere between 80-140blln of hydrocarbons according to various estimates. While low permeability and porosity prevented oil extraction previously, advent of horizontal drilling, fracking and Western expertise are likely to repeat the success of unconventional oil development in the U.S. and Canada.
Threats
- China August PMI showed contraction in new orders and employment, but expansion in raw material and finished goods inventory or de-stocking.
- Hungarian Prime Minister Viktor Orban said he will present a brand new set of terms to the International Monetary Fund and the EU in upcoming aid talks. If the lenders insist on the conditions currently on the table, he said, the deal is off.
- A recent European Court ruling told Russia to compensate pensioners who had the purchasing power of their savings ruined by the hyperinflation of the 1990s. Total debt owed to households is at $786 billion, or 10 percent of the country’s GDP.
