Emerging markets should be helped this week by news of a
tentative plan to bailout Spain's financial sector, and economic
data out of China.
[caption id="attachment_62915" align="alignright" width="300"
caption="Night scene along the Shangxiajiu pedestrian street. A
very busy shopping area in Guangzhou, China."]
The developments should help to extend last week's gains in
emerging markets as global uncertainty is reduced. The iShares MSCI
Emerging Markets Index (
) gained just over 3.0% last week, slightly underperforming the
S&P 500 index.
China reported weaker retail sales and industrial output over
the weekend but exports increased and beat expectations. Consumer
and producer prices came in below economists' forecasts, increasing
speculation of more stimulus measures from the government.
Spain went to the other eurozone governments over the weekend to
ask for assistance up to $125 billion dollars to recapitalize its
banking sector. The government is waiting for an international
assessment of need to be released some time this month to make a
formal request and a more exact figure. Leaders are still debating
whether the funds will come out of the temporary emergency fund,
EFSF, or the permanent ESM.
Despite the temporary reprieve from market tension, risk assets
such as most emerging markets will still need to face Greek
elections on the 17
and a Chinese economy that has yet to respond to stimulus
Monday, June 11
China is due to release data on money supply and new yuan loans
for the month of May. New loans have been increasing from ¥551
billion a year ago to just over ¥681 billion in April. The trade
balance increased last month as exports to Europe increased for the
first time in three months. The total surplus increased to $18.7
billion beating expectations of $16.3 billion.
Mexican industrial production may increase to just under 5.0% as
the domestic economy is complemented by strong exports to the
United States. Output averaged 4.0% in 2011.
Tuesday, June 12
India reports industrial production on Tuesday with expectations
for an increase to 1.7% from a decrease of 3.5% in March. First
quarter economic growth in India registered its slowest growth in
nine years as the government fights charges of corruption. The
government announced last week
increased stimulus measures
in infrastructure spending.
The Bank of Indonesia is expected to maintain the overnight rate
at 5.75% despite the rupiah dropping to a two year low last week.
The central bank will increase its dollar sales to support the
local currency which has depreciated 6% this year and threatened an
increase in inflation for the Muslim leader of emerging
Wednesday, June 13
ChinaEdu Corporation (
) is scheduled to report first quarter earnings with expectations
for a gain of $0.06 per share compared to $0.03 in the same quarter
last year. The online education provider trades at 42.5 times
trailing earnings and is up 4.1% over the last year.
Thursday, June 14
India's wholesale price inflation is seen increasing 7.5% on an
annualized basis in May after a 7.23% increase in April. Despite
persistently high inflation, the central bank has started to cut
rates to increase growth. A half percentage cut in April is
expected to be followed by another quarter of a percent cut when
the bank meets on June 18
. Standard & Poor's cut the emerging markets' long-term outlook
to negative in April on a high deficit and structural problems in
the government's ability to implement policy.
The WisdomTree India Earnings (
) has lost 28.3% over the last year, underperforming the iShares
FTSE China 25 Index (
) by more than 5%. While both emerging markets are addressing
slower growth, China's stimulus programs have been more effective
to date and should continue to outperform.
The double-digit growth in Brazilian retail sales may cool as
the non-manufacturing PMI fell below 50 last month and consumer
loan defaults increase. Expectations are for an annual increase of
only 8.0% versus growth of 12.5% reported in the previous
Friday, June 15
The Central Bank of Russia will most likely keep its refinancing
rate at 8.0% on Friday. The domestic economy continues to perform
impressively in light of global uncertainty. The ruble slid 15%
against the dollar in May and 10% against a basket of currencies as
oil prices entered a bear market, dropping over 20% in a few