Eq: EMs

(Shanghai)

China’s markets have been tumbling since the new year began, and they are now flirting with bear market territory. Stocks have dropped to below where they were during the summer’s rout and have now fallen nearly 20%. Stocks on the Shanghai Composite fell to more than a 20% loss from their previous December 22nd peak, but rose by 2.0% to close above the bear market level. The Chinese Yuan continued to devalue in offshore trading, which is presumably continuing to weigh on investor sentiment. According to the head of greater China at BMO Asset Management, “The [Chinese] currency is causing tension in the whole world … What we’re seeing now is the result of a lot of government intervention”.


FINSUM: The market continues to look bad, though it still seems too early to tell if this is a sign that the economy is set for a big slowdown, or whether this may yet prove a false alarm.

Source: Wall Street Journal

(Sao Paulo)

Brazil’s economy can be described in one terrifying word: stagflation. New data shows that inflation in Brazil is getting out of hand, with the figure jumping to 10.67%, well beyond the central bank’s target of 6.5%. The country’s debt has been downgraded to junk by Standard & Poor’s and Fitch since September, and the country’s economy is struggling whilst a major government corruption scandal drags on. In a very bearish assessment, an analyst from Capital Economics summed up the country’s situation this way, saying “Faced with a sharp deterioration in its terms of trade and an overhang of private and public debt, the uncomfortable truth is that there is relatively little Brazil can do to bolster demand … At this stage, the least painful option is to probably try and regain some of the confidence of investors that has been lost in the chaos of the past year”.


FINSUM: Brazil’s economy is in a terrible place, and it seems there is little prospect for it to improve any time soon.

Source: Financial Times

(Beijing)

As many will know, part of the most recent Chinese stock meltdown has been weak economic data. Now with the government reportedly buying to prop up stocks, new inflation data has come in. Consumer prices rose just 1.6% year on year in December, while producer prices fell 5.9%, more than expected. The article says that deflationary pressures have eased in China, but they are still a concern. The worst of the slowdown is falling on the manufacturing sector, which can be seen in how much producer prices are falling. The chief economist for HSBC, Qu Hongbin, says “The weaknesses in both domestic investment and external demand have exacerbated the deflationary pressures in the economy. All measures of prices now underscore the rising deflationary risks”.


FINSUM: This is bad news, and while it is not worse than recent inflation data, it will do nothing to help stem the tide of panicked selling in China.

 

Source: Financial Times

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