The EMEA (Emerging Europe, Middle East and Africa) markets have done relatively well versus their de...
The EMEA (Emerging Europe, Middle East and Africa) markets have done relatively well versus their developed market peers over the last few months.
For example, the South African FTSE/JSE Africa All-Share index is up by 19.25% in the three months to 2 January 2003, with the Polish WSE WIG index up by 20.73% over same time period, both in dollar terms.
Among other EMEA markets, the Turkish stock market recently rallied on the back of the election results even though the victors (AKP) have no experience in government. The magnitude of their victory enabled Turkey to have its first majority government in almost 15 years.
Moody's recently raised the long-term foreign currency rating of the eight Central European first wave candidates for EU accession by two to three notches. This brings them in line with their local currency debt ratings and the move included Poland, Hungary and the Czech Republic. Moody's stated that the process of financial integration of these countries with the EU is virtually irreversible and that such integration significantly reduces the risk of a currency crisis that could lead to a systematic interruption in the timely servicing of foreign currency debt.
Following the collapse of the governing national unity coalition, Israeli prime minister Ariel Sharon was unable to agree with the extreme right on the formation of a coalition and called early elections.
The unanimous 15-0 decision by the UN security council on the resolution regarding Iraq boosted the price of crude oil. While this should benefit the Russian oil companies, however, we expect the oil price to be volatile in the coming months on the back of newsflow regarding Iraq.
Meanwhile, the economic background in the Latin America region remains mixed. Argentina recently withheld payment on a loan to the World Bank and has pushed back its presidential elections by one month. That said, there are signs that the economy is beginning to at least stop falling back.
Mexico and Chile are both facing slower than expected GDP growth, both countries have more ties to global trade and are riding the global economic slowdown. Brazil has also recently positively surprised the markets with the pace of its third-quarter GDP growth.
Despite earlier fears, President elect Lula in Brazil has rarely shown signs of left-wing radicalism since winning the elections and has maintained a reasonable line. The only time Lula did appear to sabre rattle was when he asked the government to delay the privatisation of several state banks. Lula is also expected to announce his cabinet appointments very soon, a move that the markets are keenly awaiting.
At the stock level, Corus, the European steel company, pulled back from its planned merger with CSN of Brazil, highlighting the complexities and weak global demand for steel.
However, Gerdau, one of our holdings, announced strong third quarter results. In general, most of our holdings announced resilient third-quarter earnings. However, the outlook remains weak as macro-economic growth and the strain of a pressured currency and government debt levels weigh on Brazil.
Lula has maintained a moderate line.
Turkish market rallied on back of election.
Argentina is starting to stop falling back.
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