There are too many near-term uncertainties to make an outright directional call on EM. Between a looming deal for Greece, a fragile agreement in Ukraine, the bounce in commodity prices and fall in the dollar, we prefer to focus on market-neutral relative value strategies.
The US dollar is little changed in Europe after a quiet Asian session. Both the US and Canada are on holiday today. The key focus it euro group meeting today as they discuss the terms of Greece’s aid.
As 2014 fades in the rear-view mirror, the Chinese economy exhibits two sharply conflicting trends: while economic growth continues to decelerate, the stock market is rising steadily. The capital market boom — which started mid-year and accelerated following the People’s Bank of China’s (PBoC) rate cuts in late November — might be supported by expanding liquidity (monetary policy easing) and sentiment (expectations of reform) but certainly not fundamentals (corporate profitability).
There is a high degree of uncertainty in the global markets. How deep into negative territory can nominal bond yields fall? Has oil bottomed? Are deflationary forces deepening? Will Greece remain within EMU, will the monetary union be stronger or weaker, as a result?
China’s new government fund for venture capital has real potential to significantly promote China’s domestic entrepreneurship and innovation. But if access to the new funding is too easy, the projects main objective will be jeopardised.
Since the launch of bold economic reforms in 1986, Vietnam has transformed itself from an impoverished and isolated economy into one of the fastest-growing and most open economies in the world. But it should not be complacent. It must undertake decisive and bold productivity reforms to reignite transformational prosperity in the coming decades.
Over the last week, Russia (+10.3%), Hungary (+6.1%), and Czech Republic (+2.3%) have outperformed in the EM equity space as measured by MSCI, while Turkey (-3.5%), Korea (-3.1%), and Colombia (-3.0%) have underperformed. To put this in better context, MSCI EM rose 0.6% over the past week while MSCI DM rose 1.6%.
What a difference a week makes. Last week’s US employment data had put the dollar bulls back into control. Developments over the last 24-48 hours have seen the reins slip from their hands.
ASEAN needs a ready and capable steward in 2015 and Malaysia looks to be in the right place at the right time. Malaysia has made clear that realising the ASEAN Economic Community (AEC) by the end of the year will be its main goal for its 2015 chairmanship of ASEAN. In this regard, a recent essay by Malaysia’s Minister of International Trade and Industry Mustapa Mohamed provides subtle but significant indicators of the government’s leadership objectives and the approach to accomplish this.
The Reserve Bank of Australia cut its benchmark interest rate to an all-time low of 2.25% on February 3. The move came as the Australian government sought to rejuvenate an extremely sluggish economy while at the same time keeping downward pressure on the Australian dollar.
