South Korea’s economic rise since the 1960s could be attributed to many factors: its geographic position, a homogenous and hard-working population, sound economic governance exercised by authoritarian governments, and a conducive geopolitical environment. It has economically matured, having raised its per capita income fivefold since the 1950s, when it was estimated to be lower than India’s.
After last Friday’s failed coup attempt in Turkey, a measure of calm has returned to global markets. We did not think Turkish developments have wide-reaching implications for EM assets, but we do remain very negative on Turkish assets in the wake of the coup and ongoing political uncertainty.
Political Outlook
EM ended last week on a soft note, due in large part to the attempted coup in Turkey. Weakness in the lira spilled over into wider EM weakness in thin Friday afternoon market conditions. The situation in Turkey has calmed, and so EM may gain some limited traction this week. However, that calm will likely be very fragile and so we retain a defensive posture concerning EM.
Since the UK voted to leave the EU, emerging market equities have outperformed equities from the developed markets. This Great Graphic, composed on Bloomberg, shows the MSCI Emerging Market equities (yellow line) and the MSCI World Index of developed equities (white line).
Both time series are indexed as to June 15, but they were at nearly identical levels as the UK voted. The developed market equities fell more than emerging markets. The UK and Japanese stocks were particularly hit, and the drop in yields saw financial stocks crushed.
Compared with its Asian near neighbours, Indonesia has long been tolerant of same-sex sexuality and transgenderism. Unlike Singapore and Malaysia, Indonesia never criminalised homosexuality and has been accommodating of transgender people.
The US dollar is broadly mixed against the major currencies. The Swiss franc’s 0.25% gain puts it at the top of the board, after sterling’s earlier gains were largely unwound in late-morning turnover. The yen is the weakest major, extending its loss by 0.6%, to bring the weekly decline to more than 5%. The pre-referendum result high for the dollar was near JPY106.85. Today’s high has been about JPY106.30. In emerging markets, we note that the Taiwanese dollar is at 11-month highs, helped by $3 bln portfolio capital inflow this week.
Reining in big business? Chris Radburn / PA Wire
The most radical proposal for the extension of workplace democracy in a generation has been made not by Labour leader, Jeremy Corbyn, but by Theresa May, the UK’s new prime minister.
Headed for number 11. Dominic Lipinski / PA Wire
Philip Hammond, the UK’s new Chancellor of the Exchequer, has a lot on his plate. He faces a slowing economy urgently in need of stimulus. He confronts tough choices over public spending and will be under pressure to reverse the austerity policies of his predecessor. The question for Hammond is not whether to stimulate the economy, it is when and how.
Most of us have never known a world where the United States was not the preeminent power. Now things are starting to look rather different. Not only is much of the global economy stuck in an underperforming rut, but there is also an alternative, seemingly more successful, model of economic development on offer in the so-called ‘Beijing consensus’.
It is precisely this reality, and the hitherto impressive performance of the Chinese economy, that has led some to conclude that, as Martin Jacques puts it, China will ultimately ‘rule the world’.
One of the most hotly debated topics in development economics is what does it take to steer a poor country from Third World to First World status?
It is a debate of particular relevance in Africa, which is home to a large number of countries in the Third World category.
It also has some of the fastest-growing economies in the world.
