Emerging Markets

July 11, 2014

By: Darren Viegas

Emerging Stocks Head For Weekly Loss Amid Portugal Debt Concerns

Summary: Emerging markets are headed for a weekly loss due to the increase of perceived risk in Europe. So far Indonesian stocks have slid and the Russia’s Ruble has weakened. Head of Emerging Markets equities at Blackfriars Asset Management said that the risk in Europe has been complacent and Thursday was “wake up call”. A resurfacing of the debt issues would push up risk premia.
Commentary: Surprisingly enough, the Euro area debt concern has wreaked havoc in the emerging markets. My guess is that Investors are increasing their perception of risk in international equities and fixed income. This will be an event to watch in the future

Lira Caps Weekly Gain After Current-Account Deficit Shrinks

Summary: The Turkish Lira has rose along with Bonds as Turkeys current account deficit narrowed more than estimated. The deficit narrowed to $3.4b billion in May from $4.8 billionin April. Theestimate was $4 billion. The lira rose to 2.1195 per dollar and Two year bonds fell basis points.
Commentary: Turkey is now the second fragile five member, along with South Africa, to post a current account deficit reduction that has beat estimates. This is a bullish sing for emerging markets investors. Fragile five members will be in a race against the clock to reduce current-account deficits before the US hikes its fed fund rate.

Emerging Markets’ Chocolate Lovers Boost Cocoa Prices

Summary: Years of rapid growth in chocolate consumption have given India and other Emerging markets extreme sway in the price of cocoa. The countries’ cumulative global chocolate is at 45% this year up from 33% a year ago. Cocoa has risen 43% in the past year, partially due to increased chocolate consumption in India, Saudi Arabia, and China. Rising incomes in these countries have made chocolate an everyday habit.
Commentary: Cocoa’s immense price appreciation over the last year can partially be attributed to growth in the emerging markets. Look for cocoa’s price to be affected when the emerging markets are hit during US interest rate hikes.

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