Emerging Markets and Inter-dependence Growth
The world's often fragile network of emerging economies is perhaps more interconnected than ever, according to a recent study by the British company Ashmore Investment Management. The study's main finding is that investors in emerging markets countries are beefing up their positions in other emerging markets, even as they keep their asset flows into the developed world fairly steady.
WASHINGTON – The U.S. trade deficit surged to a larger-than-expected $40.18 billion in December, the biggest imbalance in 12 months. The wider deficit reflected a rebounding economy that is pushing up demand for oil and other imports.
The deficit with China totaled $226.83 billion in 2009, still the largest imbalance with any nation but down 15.4 percent from the all-time record of $268.04 billion set in 2008.
The deficit with Canada dropped by 74.2 percent in 2009 to $20.21 billion while the deficit with the European Union fell by 36.8 percent to $60.54 billion.
The study looks at cross-border investments, which are investments in foreign governments and companies (for example, if someone from India buys shares of a mutual fund that invests in U.S. companies). Ashmore's numbers show that in 2001, investors in emerging markets countries put about 5 percent of their cross-border investments into securities housed in other emerging markets. By the end of 2008, that number had grown to about 25 percent. The remaining 75 percent went to developed markets.
For their part, investors in developed countries have kept their stakes in emerging markets relatively unchanged: In both 2001 and 2008, roughly 5 percent of their cross-border investments were in emerging markets.
BEIJING – China's export growth accelerated in January and imports rose, adding to signs a recovery in global and Chinese demand is on track.
January exports rose 21 percent from a year earlier, up from 17.7 percent growth in December, customs data showed.
Imports skyrocketed by 85.5 percent due to being compared with a period last year when companies were idled for the weeklong Lunar New Year holiday.
Still, growth exceeded forecasts by many private sector economists, suggesting trade was recovering from the global crisis that battered Chinese exporters of shoes, toys and other low-cost goods and wiped out millions of factory jobs.
Asian stocks were mostly higher. China's Shanghai index advanced 1.1 percent, Japan's Nikkei 225 index closed up 0.3 percent, Hong Kong's Hang Seng rallied 0.6 percent, Australia's benchmark gained 0.2 percent and markets in India, Taiwan, Malaysia and Indonesia also gained.
Only South Korea bucked the regional trend with the Kospi index slipping less than 0.1 percent.
Emerging markets up while Developed markets In trouble
The study, done by Ashmore's Ousmène Mandeng, excludes central banks' investments. As a result, it primarily captures the behavior of private investors, such as individuals and companies, as opposed to governments. For the purposes of the study, all countries except for the United States, Canada, Japan, Australia, New Zealand, and the 12 original European Union members are considered to be emerging markets.
Broadly speaking, Mandeng's findings point to a growing interdependence among the world's emerging economies, many of which are looking for stability after years of boom and bust. The study also indicates that investors in emerging markets are buying into the idea that "economic power is being transferred increasingly from advanced economies to emerging markets," says Mandeng.
LONDON – The Bank of England cut its forecast for economic growth and warned that inflation is likely to slump in coming months, providing a downbeat assessment of Britain's recovery from its worst recession in decades.
Governor Mervyn King left the door wide open for the central bank's asset purchasing program to boost the money supply.
While emerging markets investors are generally enthusiastic about other parts of the developing world, Mandeng found a fairly wide range. Thai investors, for example, stashed 55.7 percent of their cross-border investments in other emerging markets in 2008. For Colombians, that number was just 0.3 percent.
