Investing In Emerging Markets: January 2007

Monday, January 22, 2007

Investors and banks pumped half-a-trillion dollars into emerging markets last year, with China and other Asian economies accounting for the lion's share of such money flows, the Institute of International Finance (IIF) said on Thursday.

Last year's figure of US$502 billion was just slightly below the record level of US$509 billion in 2005, according to an IIF report.

The report by the global association of big financial institutions and banks, showed investors remained upbeat on countries with greater economic risks last year, but that this trend will likely moderate somewhat this year.

The IIF, chaired by Deutsche Bank AG chairman Josef Ackermann, said the volume of private capital flows to emerging markets was likely to total US$469 billion this year.

Although this would mark a slowing of overall capital flows, to the 30 countries covered in the survey, the IIF said it would still represent the third highest level of flows recorded.

The institute, however, cited several risks to its outlook, including "uncertainties about the duration and severity of the ongoing housing slump in the United States, as well as its impact on the rest of the economy."

The IIF said net private capital flows of US$197 billion went to Asia last year, while emerging European economies acccounted for US$218 billion. Some US$46 billion went to Latin America and US$31 billion to Africa.

The IIF said that Asian economic powerhouse China would likely continue to be the recipient of the largest share of net direct investment.

"China will continue to dominate in this category, accounting for US$55 billion of total net direct investment flows to emerging markets," the report said.

Europe's emerging economies are likely to receive the biggest share of commercial bank lending in the coming year, however, "accounting for 70 percent of all such lending to emerging markets," the report said.

The report's authors said they generally expected the world's financial markets to remain stable over the next 12 months.

Growth in Asia is seen exceeding 7.5 percent for the fifth straight year, with China's breakneck economy moderating to "a more sustainable" growth clip of 9.5 percent this year.
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Wednesday, January 17, 2007

Mobile phone maker Sony Ericsson said on Wednesday it had recorded a good performance in emerging markets as well as developed countries.

"We have been competing strongly. This share growth and volume growth was also underpinned in emerging markets," company president Miles Flint told a conference call after Sony Ericsson reported record quarterly profits.

Monday, January 08, 2007

Emerging-Market stocks had their worst week in almost six months on falling commodity prices and US economic reports that fuelled concern that global economic growth will slow.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, led the drop, falling 7.2% for the week, as crude oil had its biggest weekly decline since April 2005. An index of contracts to buy existing homes in the US fell this week, fuelling concerns that global demand for building materials is slowing. The Morgan Stanley Capital International Emerging Markets Index, which tracks 25 developing markets, fell 2.1% this week, the most since the week ended July 14 and its first loss in 15 weeks. The measure jumped 29% last year.

“A slowing US housing market, and indications that the Federal Reserve will cut rates later rather than sooner, came as a negative surprise to a market that had a very strong run,” said Dimitri Chatzoudis, who manages about $1 billion in emerging-market shares at ABN Amro Holding NV in Amsterdam. “Commodity stocks are the most exposed to signs of an economic slowdown.”

Crude oil fell 7.8% this week, the steepest weekly decline in New York since April 2005, as warm US weather reduced heating demand. Copper prices in New York had the biggest weekly decline in a decade as slower US economic growth reduced demand for metals used in homes, appliances and cars.

South Africa’s Sasol, the world’s biggest producer of motor fuel from coal and PetroChina, the nation’s biggest oil company, fell morethan 5%.

An index of signed purchase agreements to buy previously owned homes fell 0.5% in November, a third consecutive decline, to 107 from 107.5 in October, the National Association of Realtors said on Thursday.

This week’s minutes from the Fed’s December 12 meeting said the “predominant concern” is rising prices and the risk of a slowdown is more than anticipated. Southern Copper, the world’s second-largest mining company by reserves, lost 6.5% this week in Peru. Indexes in China, Thailand, Poland, Turkey, Hungary, Mexico, Colombia and Peru fell more than 1%.

Global stockpiles of copper are at the highest level since June 2004. The US economy grew at the slowest pace of 2006 in the third quarter, led by a decline in homebuilding quarter. Builders are the biggest consumers of copper. Prices tumbled 12% this week, touching a nine-month low.

Copper futures for March delivery dropped 6.7 cents, or 2.6%, to $2.535 a pound on the Comex division of the New York Mercantile Exchange. Crude oil for February delivery rose for the first day in three, up 72 cents, or 1.3%, to $56.31 a barrel on the New York Mercantile Exchange.

Petrobras fell for a third day, down 1.46 reais, or 3.1%, to 46.19. The stock rose 34% last year. Mol Nyrt, Hungary’s largest oil company, slid 2.5% to 20,275, extending its weekly retreat to 6.1%.

PTT Exploration, the nation’s second-largest natural gas producer, fell 1.6% to 93 baht. Shares of the two companies accounted for about 20 percent of the decline in the benchmark SET Index, which sank 3.1%.

Thursday, January 04, 2007

Investors are expected to target emerging stock markets in 2007 for a sixth straight year, with major investment banks predicting the Morgan Stanley Capital International Emerging Markets Index will climb as much as 15% in the year, Bloomberg reported. Investors are targeting telephone companies and banks to profit from growing domestic spending, the report said.

The Bloomberg report said that emerging market stocks may lead global equity returns for a sixth successive year as consumers from China to Brazil were becoming sufficiently rich to support economic growth even as exports slowed.

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