Emerging markets turned in a flat performance last week as
losses in the Chinese market brought the iShares MSCI Emerging
) to a flat performance versus a 1% gain in the S&P500.
[caption id="attachment_69705" align="alignright" width="300"
caption="Qingdao skyline, Beijing"]
China will return to the emerging markets spotlight this week
with a number of companies reporting earnings. The broader iShares
FTSE China 25 (
) has underperformed other emerging markets by more than 6% this
year as government stimulus fails to support economic growth.
Reported profits have generally been weak
so far with non-financial state-owned companies reporting a 13%
drop in earnings over the first seven months of the year. Investors
may want to position for renewed stimulus measures later in the
week if earnings reports disappoint by a wide margin.
Data out of other emerging markets will be of mostly secondary
importance this week, meaning headline risk could boost volatility
in the low-volume markets of the last few weeks. Investors may want
to hedge their inflation bets around the release of the minutes for
the last FOMC meeting in the United States on Wednesday. Eurozone
GDP and PMI numbers out on Thursday could remind markets of the
dire economic environment and threaten upward momentum.
Monday, August 20
Thailand reports GDP for the second quarter with the consensus
looking for year-over-year growth of 3.1% against 0.3% in the
Emerging markets wunderkind Chile is expected to show that weak
global growth and commodity prices have slowed its growth when it
reports second quarter GDP growth. Expectations are for 5.4% growth
year-over-year compared to 5.6% in the previous quarter. Despite
short-term weakness, the country should continue to outperform
other emerging markets as strong macro policies by the government
support growth. A rebound in the U.S. housing market should help to
stabilize copper prices over the next several quarters.
Poland is expected to report a strong rebound in industrial
output for the month with consensus estimates of 4.0% against
annualized growth of 1.2% previously.
Reporting earnings on Monday are Charm Communications (
), Chinacache International (
), Elong Inc (
), Shangpharma (
) and VisionChina Media (
Tuesday, August 21
China's Qihoo 360 Technology (
), a $2.2 billion provider of internet services and security, is
expected to report $0.17 per share in earnings after the market
closes on Tuesday. The company has generally beaten expectations in
the past on both revenue and bottom-line growth.
Wednesday, August 22
Consumer inflation in South Africa is expected to fall
further to 5.2% against last month's 5.5% annual pace, giving
monetary authorities more room to support a sluggish economy. While
are still well below the 11.6% pace reached in 2008, the increase
in grain prices this summer is seen as a possible problem later in
Mexico reports retail sales on Wednesday with expectations of
further weakness and growth of 4.0% compared to the 5.2% report
that exceeded estimates last month.
Colombia should report a slight rebound in industrial production
and retail sales after disappointing numbers last month led to a
surprise cut by the central bank. Industrial production is seen
flat after a loss of 0.3% and retail sales should recover slightly
to 1.5% annual growth.
Reporting earnings on Wednesday are China Kanghui Holdings (
) and China Nuokang BioPharma (
Thursday, August 23
Foreign investment in Brazil rebounded in June to $5.8
billion helping the country to pay for a widening current account
deficit, largely from decreasing exports. The
strength in foreign investment
despite a weaker economic environment and increased policy risk,
may signal a lack of options in emerging markets rather than actual
investor enthusiasm for the country. Estimates of FDI in July,
released Thursday, are for a further increase to $7 billion.
Reporting on Thursday are Bona Film Group (
) and Jinksolar Holdings (
Friday, August 24
Poland is expected to report an increase in retail sales to 7.0%
year-over-year against 6.4% growth reported last month.
The Colombian Central Bank surprised markets last month with its
first rate cut since 2010, and is expected to cut rates by another
0.25% to 4.75% on Friday. Two board members argued for a 0.50% cut
at the last meeting and the government's call for a weaker peso has
recently been echoed by central bank members as well.
) reports earnings before the market opens on Friday.