In constitution and performance, indexes are in large part designed to act as a mirror to the markets they reflect, with investors largely vying for ways to exploit information deficiencies and fleeting hunches to beat them. But in emerging markets, there is a huge discrepancy between the assets that compose these indexes and the actual asset class, raising fundamental questions about the purpose these tools serve.
Strengthening the Reserve Bank of India’s hand in resolving the country’s US$150bn distressed asset problem is a step in the right direction, but anyone looking for a quick-fix is in for a rude awakening: it’s going to get worse before it gets better, analysts suggest.
A weak dollar and stifling policies at home are making the Chinese corporate sector look increasingly towards dollar funding in 2017.
For a country facing several years of economic pressure, Malaysia showed tremendous discipline in eliminating fiscal imbalances and managing the country’s volatile currency. But for Prime Minister Najib Razak, once a focal point of a massive scandal involving state-run wealth fund 1Malaysia Development Bhd (1MDB), winning back the country’s hard earned reputation and credibility will be difficult at best.
China is making good on its promise of opening up its onshore markets to foreign investors, which only own about 2% of the country’s domestic bonds. With broad index inclusion on the horizon and the introduction of new rules aimed at easing investor access to the market paying off, analysts are turning their attention to concerns over monetary tightening and slower than anticipated growth for 2017.
India’s efforts to curtail the shadow economy and go cashless, coupled with fresh measures introduced by the country’s securities regulator and contained within the latest government budget, are likely to give a big boost to India’s bond market in 2017 despite a number of headwinds that could continue to challenge emerging markets. The development of a viable secondary market could be within reach.
The real estate sector in China is set to cool off in 2017 after the Chinese government enacted a series of measures to prevent a bubble following skyrocketing housing prices seen over the past two years.
For the first time, the president of China was in attendance at the World Economic Forum Annual Meeting in Davos this month. President Xi Jinping joined a roster of presidents, prime ministers, central bankers, executives and other officials from around the world at this prestigious event, which carried the theme this year of “responsive and responsible leadership.”
As the risk of emerging market capital outflows continues to increases, EM government have become more sensitive to unfavourable reports by international institutions.
With official agencies admitting to US$540bn in capital outflows since June, and independent estimates standing at twice that, clouds are gathering over the Chinese economy as it transitions from supply to demand-driven model. But some analysts remain upbeat about the country’s long-term prospects.
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23 Jun 2017
21 Jun 2017