The new year is getting off to a data-rich start as central banks in Latin America, Asia and Eastern Europe meet to address slower global growth. Watch China ( YAO , quote ), as always.
China's commerce minister, Chen Deming, announced Wednesday that the country will explore measures to boost internal consumption over the next year. The Commerce Minister singled out online shopping and tourism as two industries where special promotion may occur. This could present support for stocks like E-Commerce China Dangdang ( DANG , quote ) and China Lodging Group ( HTHT , quote ).
As it stands, Beijing may report a significant decrease in its trade balance on Tuesday as exports are seriously limited by weakness around the globe. Developed markets still account for approximately 70% of the nation's exports.
Bloomberg reported on Friday that Brazil ( EWZ , quote ) barely managed to meet its 2011 inflation target of 2.5% to 6.5% with price increases last year of 6.5% -- the very high end of the anticipated range, but still an important accomplishment.
This is a vote of confidence that allows Alexandre Tombini, president of Brazil's central bank, the latitude to make further cuts in the benchmark interest rate, currently at 11.0%. This, combined with more accommodative moves by the central bank, should help improve business confidence, which fell in the fourth quarter to its lowest level since the beginning of 2009.
Troubles in Hungary threaten to boil over into the rest of Eastern Europe. The country received its third downgrade to junk in two months and the forint continued to weaken. Tensions eased somewhat on Saturday as the prime minister pledged more cooperation with the central bank and led investors to hope for some form of aid from the IMF.
Without a détente in the rhetoric from the Hungarian government, investor confidence could weaken further and risk contagion into Poland ( PLND , quote ). While inflationary pressures may come down when reported on Friday, we maintain the neutral to underweight position expressed in our 2012 outlook for the region.
Monday, January 9
Economic releases for the week should get a strong start from Turkish ( TUR , quote ) industrial production increases from the last reading of 7.3% on a year over year basis. Production could increase to around 9.4% as the country continues its strong economic performance.
Mexico ( EWW , quote ) reports consumer inflation on Monday against last month's report of 3.48% on a year-over-year basis. Inflation could increase to around 3.70% as the recent depreciation in the peso helps exports but puts pressure on prices. Pressure may increase further as the government looks to stimulate the economy ahead of mid-year elections.
Tuesday, January 10
Malaysia will report industrial production on Tuesday and will likely show a swift decline to around 6.75% from a prior reading of 11.4% on an annualized basis. The central bank has been more restrictive than others in the region, which has contributed to lower inflationary pressures but also to relatively slower economic growth.
Weakening production figures could persuade the bank to a more accommodative position and would help to drive growth. This, combined with a possible increase in fiscal spending ahead of elections later this year, may help to support asset prices.
An overweight position relative to other countries in the region is maintained. The iShares MSCI Malaysia Fund ( EWM , quote ) provides investors with diversified exposure into the general market of stocks but is concentrated in financial services and industrials.
China ( YAO , quote ) will steal the show on Tuesday with the release of its trade balance which is expected to decline markedly from last month's reading of $14.5 billion. Declining exports to developed markets could bring the surplus down to around $8.8 billion and could be met by further government disclosures of stimulus measures.
Wednesday, January 11
Poland's ( PLND , quote ) central bank will most likely leave rates at 4.5% in the face of high inflation and a weakening currency. As the economy threatens to cool and investment fears play out in nearby Hungary, the risk is to a cut in the interest rate.
Mexican ( EWW , quote ) industrial production should show an increase to around 3.7% y-o-y from 3.3% last month as the economy continues to benefit from high oil prices and a relatively strong economy in the United States.
Infosys Limited ( INFY , quote ) reports third quarter earnings before market open on Thursday with analyst expectations of $0.80 per share and a 15.9% increase from the same quarter last year. The $30.8 billion company is a global technology services provider to businesses in more than 30 countries. Goldman Sachs raised their target price for the shares on Friday from $57.90 to $62.65 per share.
Thursday, January 12
China's ( YAO , quote ) consumer prices may cool to around 4.0% from a prior reading of 4.2% as slowing global growth threatens the country's economy. Producer prices will also be reported and should slow significantly from last month's 2.7% on an annualized basis.
Indian ( EPI , quote ) industrial production should be a welcome report as the country rebounds from the prior reading of -5.1%. A string of cuts by the central bank, 13 times since March 2010, should help industrial production rebound to around 1.9%.
Brazil ( EWZ , quote ) may show an increase in retail sales to around 5.2% from a prior reading of 4.3%. The country's economy should increase to approximately 3.6% this year as the central bank tries to manage rates for stronger spending.
The Chilean ( ECH , quote ) central bank may lower overnight rates by 25 basis points (0.25%) to 5.0% as the country's economy slows this year. Inflation in the Andean country is the lowest in the region with expectations of an increase of only 3.0% in prices this year, giving the authorities ample room to lower rates.
Despite slowing growth, the central bank of Peru ( EPU , quote ) will most likely leave rates at 4.25% on Thursday. Economic growth is expected to post the strongest gain in the region at approximately 5.5% in 2012 leaving the central bank's attention on inflation.
The Indonesian ( IDX , quote ) central bank may also leave its overnight rate at 6.0% as consumer inflation remains elevated relative to other countries in the region.
Friday, January 13
The Bank of Korea ( EWY , quote ) will most likely leave its base rate at 3.25% as the recent decline in the won threatens to fuel inflationary pressures. Though price increases should be relatively modest this year, the risk is to overly accommodative policy moves heightening inflation as the region's central banks face slower global growth.
Poland's ( PLND , quote ) consumer prices should show similar increases against last month's reading of 4.8% annualized though further weakness to the zloty may threaten an increase in prices.