Martes 07/08/12 Habla Bernanke, credito del consumidor

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El MIST le gana al BRIC

El conjunto de paises: Mexico, Indonesia, South Korea y Turkey ha ganado 12% en lo que va del anio comparado con el 1.5% del conjunto de Brasil. Rusia, India y China.

Goldman Sachs’s MIST Topping BRICs as Smaller Markets Outperform
By Eric Martin - Aug 7, 2012 12:00 AM ET

Jim O’Neill ushered in a decade-long investment boom in 2001 when he coined the term BRICs for the largest emerging markets. This year, a lesser-known acronym that the Goldman Sachs Asset Management chairman is helping to popularize has taken over for many investors.

The so-called MIST nations -- Mexico, Indonesia, South Korea and Turkey -- are the four biggest markets in the Goldman Sachs N-11 Equity Fund. (GSYAX) Opened in February, 2011 to invest in what O’Neill considers the next big 11 emerging markets, the fund has climbed 12 percent this year, compared with a 1.5 percent gain in Goldman Sachs’s fund for Brazil, Russia, India and China.

“We see steady inflows into the Next 11 fund each week,” O’Neill, 55, said in a phone interview from London. “It hasn’t been affected by the disappointment in the U.S. and obviously the European markets especially, and all the disappointment in some of the BRIC markets.”

O’Neill said he came up with the idea for an N-11 fund on a trip to China and South Korea two years ago as a way to help investors benefit from growth beyond the BRIC nations that had dominated emerging markets investing. With populations that for the most part are younger than the U.S. and Europe and have higher birth rates, fueling economic expansion, the N-11 nations are emerging from the shadow of the BRICs, where growth is slowing and investors are pulling out funds.

Outpacing BRIC
The MIST economies more than doubled in size in the past decade, topping Germany last year. In Mexico, Latin America’s second-biggest economy, record auto exports are helping growth outpace Brazil’s for a second year amid waning Chinese demand for the South American nation’s commodities. Indonesia’s domestic spending and investment helped the nation’s economic growth accelerate to 6.37 percent in the second quarter, surprising economists who forecast a slowdown.

Besides the MIST nations, the N-11 countries include Bangladesh, Egypt, Nigeria, Pakistan, the Philippines and Vietnam. Iran is also a member, though Goldman Sachs says its fund doesn’t invest in Iran because it isn’t an open market for foreign investors. The nation is subject to sanctions imposed by the U.S. and European Union over its nuclear program.

Goldman Sachs’s N-11 fund has beaten 93 percent of U.S.- based emerging-market equity funds this year, while the BRIC fund has lagged 89 percent of them, according to data compiled by Bloomberg. The N-11 fund has still trailed its benchmark, the MSCI GDP Weighted Next 11 ex-Iran Index, which has climbed 17 percent this year. The MSCI BRIC Index (MXBRIC) has risen 1.7 percent this year, more than the 1.5 percent gain for the Goldman Sachs BRIC fund.

Fuelling Growth
While outperforming them in growth this year, the MIST nations don’t approach the BRICs in economic output or population. Total GDP for the MIST nations was $3.9 trillion last year, less than one third of the $13.5 trillion BRIC economies and compared with $7.3 trillion for China alone, according to data compiled by Bloomberg. In population, the MIST nations have fewer than 500 million people, compared with about 2.9 billion in the BRIC nations.

Goldman Sachs’s N-11 fund had $113 million in assets and was invested in 73 stocks at the end of the second quarter, while the New York-based bank’s BRIC fund had $410 million in assets and held 72 stocks.

While O’Neill isn’t involved in either fund’s management, they were built to capture economic growth in the nations he identified as likely to make the greatest increased contribution to global GDP. The MIST nations accounted for about 73 percent of N-11 GDP last year, according to data compiled by Bloomberg.

Paying Off
The investment strategy is paying off. Mexico’s benchmark IPC Index (MEXBOL) has climbed 11 percent this year, compared with a 2.8 percent gain in Brazil’s Bovespa. (IBOV) Turkey’s ISE National 100 Index (XU100) has surged 28 percent and Indonesia’s Jakarta Composite Index (JCI) has gained 7.4 percent, while South Korea’s Kospi (KOSPI) has increased 3.3 percent.

The BSE India Sensitive Index (SENSEX) is the best-performing among BRICs equity benchmarks, increasing 13 percent, compared with a 2.6 percent gain in Russia’s Micex Index (INDEXCF) and a 2 percent drop in the Shanghai Composite Index. (SHCOMP) By comparison, the Standard & Poor’s 500 Index (SPX) is up 11 percent this year, while the Stoxx Europe 600 Index (SXXP) has climbed 9.1 percent.

“You’ve seen a rotation in the leadership based on rate of economic growth,” said Paul Christopher, the St. Louis-based chief international strategist at Wells Fargo Advisors, the third-largest U.S. brokerage with $1.2 trillion in client assets. “If you go back as far as just 2009, you’ll find people buying the BRIC story in a big way, and probably over-buying the BRIC story.”

Pouring in Money
Investors poured about $67 billion into BRIC stocks from 2001 to 2010 as they beat the S&P 500 by 281 percentage points. They withdrew about $15 billion last year, the most on an annual basis since at least 1996, according to Cambridge, Massachusetts-based research firm EPFR Global.

Still, equity funds investing in the MIST nations haven’t been immune from global growth concern. While investors added a net $104 million to funds focused on Turkey and $123 million to Indonesian funds this year through Aug. 1, they withdrew $1.33 billion from South Korea and $115 million from Mexico, EPFR says.

The MIST nations each account for at least 1 percent of global GDP and are likely to see that share increase this decade, O’Neill said. Of the four countries, O’Neill said Mexico and Turkey are the most attractive at the moment.

Low-Cost
Mexico is increasingly competing with China for manufacturing as costs climb in the Asian nation, O’Neill said. Mexico’s economy grew 4.6 percent in the first three months of 2012, the fastest pace in six quarters, on increased shipments to the U.S. America Movil SAB (AMXL), the wireless carrier controlled by billionaire Carlos Slim, the world’s richest person according to the Bloomberg Billionaires Index, was the top holding in the N-11 fund at 7.9 percent at the end of June.

Brazil, which grew at an average 3.7 percent annual rate from 2000 through 2010, trumping Mexico’s 2.1 percent expansion, is forecast to grow less than 3 percent for a second straight year in 2012, according to the median estimate of analysts surveyed by Bloomberg.

Wells Fargo’s Christopher advised investors to sell stocks in the BRIC nations at points in the first half of the year and recommends buying equities in Indonesia, where economic growth has exceeded 6 percent for seven quarters. Plans by the government in Southeast Asia’s largest economy to build railways, airports and seaports to bind its islands closer together are helping to counter a slowdown in European demand for commodities exports.

Christopher also recommends buying stocks in South Korea, which he says will benefit from rising exports as China’s domestic spending climbs.

Credit Rating
Fitch Ratings and Moody’s Investors Service have raised Indonesia’s debt to investment grade in the past eight months, with Fitch increasing it to BBB- in December and Moody’s lifting it to Baa3 in January.

The credit outlook in India is moving in the opposite direction. India’s economy grew 5.3 percent in the first quarter, the least in nine years, and S&P warns that the country may be downgraded unless growth picks up and political roadblocks to decision-making are overcome. A blackout left 640 million people in India without light on July 31, a day after a separate power cut left 360 million people without electricity.

India is suffering from “an absence of effective leadership,” O’Neill said. “India always is very proud of the fact it’s the biggest democracy in the world, but as I frequently joke with them, India’s democracy is so good that it doesn’t work.”

A phone call to the Indian embassy in Washington seeking comment wasn’t immediately returned.

Open Economies
With the exception of China, all the MIST nations ranked higher on the Geneva-based World Economic Forum’s 2012 trade openness index than the BRIC countries. While South Korea was ranked 34 out of 132 and Indonesia 58th, Russia trailed in position 112 and India at 100.

Turkish stocks have rallied after the government cut its fiscal deficit to 1.3 percent of GDP last year from 3.6 percent in 2010, garnering a credit rating upgrade by Moody’s on June 20 to Ba1, one level below investment grade.

Russia’s $1.8 trillion economy, after unexpectedly accelerating in the first quarter, is feeling the squeeze from oil prices that plunged as much as 22 percent this year. The price of crude pared its losses in July and is now down 6.7 percent since the end of December. Russia relies on oil and gas exports for half of its budget revenue.

Russia’s Economy
Former finance minister Alexei Kudrin said on May 24 that Russia’s economy has a 50 percent chance of slipping into recession due to the crisis in Europe, the buyer of more than half its exports. Russia’s gross domestic product may grow as much as 4 percent this year, more than the government’s previous projection of 3.4 percent, Economy Minister Andrei Belousov said on July 20.

While O’Neill includes South Korea in the MIST grouping, the nation differs from the other three in demographics, development and wealth. Known as one of the Asian Tigers as it grew an average 9 percent from the 1970s until the Asian financial crisis in 1997, South Korea will expand 2.9 percent this year, according to the median estimate of analysts surveyed by Bloomberg.

Aging Society
South Korea lacks the youth that O’Neill says will help drive growth in the other MIST nations. Only about 16 percent of South Korea’s population is under the age of 15, compared with at least 25 percent in Mexico, Indonesia and Turkey, according to estimates by the New York-based United Nations.

South Korea “happens to be the only populated country that in my lifetime has transformed its income from that of an African country to being that of a G-7 country,” O’Neill said. “It’s an example that all these other countries can learn from.”

The MIST nations may not outperform the BRICs for long, especially now that China’s government is stepping in to prime the economy, O’Neill said. Moreover, the Shanghai Composite’s decline has left it valued at 9.6 times estimated profit, compared with the three-year average of 14.7. The MSCI BRIC Index trades for about 9 times estimated profit, compared with 13.5 times for the S&P 500, data compiled by Bloomberg show.

Economic Weight
The recent underperformance in BRIC equities isn’t reason to give up on the long-term potential of economies that grew at an average pace four times faster than the U.S. from 2001 through 2010, O’Neill said. He forecasts that the BRIC nations will grow an average of about 6.5 percent a year through 2020, compared with 5.5 percent for the N-11 group.

O’Neill says he has three times turned down requests from Goldman Sachs salespeople to start a fund focused only on the MIST countries, and not only for economic reasons.

“You get very large exposure to them in the N-11 fund,” O’Neill said. “I’m also quite cognizant of not going down in history as being the guy that just constantly created acronyms.”

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Los SWAPS de Brasil subiendo debido a que la inflacion en ese pais se esta acelerando.

El pronostico de crecimiento de Brasil fue rebajado de 1.9% a 1.85% este anio. Los intereses han sido recortados en 4.5% al nivel record del 8% para impulsar a la economia.

Brazil Swap Rates at Highest in Almost Week on Faster Inflation
By Josue Leonel and Gabrielle Coppola - Aug 6, 2012 5:37 PM ET

Brazilian swap rates rose to the highest level in almost a week as a report showed inflation is picking up, reducing speculation the central bank will sustain the pace of cuts in borrowing costs.

Swap rates on the contract due in January 2014 increased one basis point, or 0.01 percentage point, 7.79 percent today in Sao Paulo, the highest level on a closing basis since July 31. The real fell 0.1 percent to 2.0311 per U.S. dollar.

Inflation as measured by the IGP-DI index accelerated in July to 1.52 percent from 0.69 percent in the prior month, the Getulio Vargas Foundation reported today. The median forecast in a Bloomberg survey was for 1.46 percent inflation.

“The IGP-DI came higher than expected, and food prices are going to suffer more with the drought in the U.S.,” Eduardo Galasini, the head of treasury at Banco Banif in Sao Paulo, said in a telephone interview.

Analysts in a central bank survey reduced their 2012 growth projection. The economy will expand 1.85 percent in 2012, compared with a projection of 1.90 percent growth last week, according to the median forecast of about 100 responses in a central bank survey published today.

The central bank has cut the target lending rate by 4.5 percentage points since August 2011 to a record low 8 percent to help spur growth and shield Brazil’s economy from the European sovereign-debt crisis.

The analysts in the central bank survey lowered their estimate for the 2012 year-end target lending rate for the first time in almost two months. Policy makers will cut the Selic to 7.25 percent, according to the median estimate.

Low employment and real wage increases will help drive Brazil’s economic growth to a 4 percent annual rate by year-end, bank President Alexandre Tombini told reporters in late July.

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Las reservas internacionales del Banco Central de Suiza estan en territorio record, tienen nada menos que 406.5 billones de Swiss francs o $420 billones. Eso es el 71% de su PBI (GDP). Han subido 10 veces mas desde el 2009.


SNB’s Franc Defense Swells Cash Reserves to 71% of GDP: Economy
By Klaus Wille - Aug 7, 2012 7:44 AM ET

The Swiss central bank’s foreign- currency reserves surged to a record in July as the euro region’s increasing turmoil forced policy makers to step up their defense of the franc ceiling.

Switzerland’s cash pile swelled 11.3 percent in the month to 406.5 billion Swiss francs ($420 billion), the Swiss National Bank said on its website today. That pushed holdings to 71 percent of gross domestic product. Walter Meier, an SNB spokesman in Zurich, said “a large part” of the increase resulted from currency purchases to defend the minimum exchange rate.

The central bank’s foreign currency reserves have expanded almost tenfold since March 2009, when it started its first round of purchases to prevent the franc from appreciating against the euro, the currency of the country’s main trading partners.

SNB President Thomas Jordan has pledged to enforce the franc ceiling of 1.20 per euro “with unlimited purchases of foreign currencies if needed.” The central bank implemented the cap in September to fight deflation and help exporters. Its reserves have soared 44 percent since the end of that month, according to SNB data calculated to International Monetary Fund standards.

“The SNB can keep its pace of interventions for a pretty long time unless there is a massive disruption like the collapse of the euro area,” said Maxime Botteron, an economist at Credit Suisse Group AG (CSGN) in Zurich. “As they increase liquidity through their purchases, the only limiting factor is inflation. However, that is not a concern at the moment.”

Haven From Crisis
The Swiss franc weakened after the release and traded at 1.2017 versus the euro at 1:16 p.m. in Zurich. It has traded in a range of 1.20 to 1.24 since the cap was imposed, breaching it just once on April 5. Against the dollar, the Swiss currency traded at 96.76 centimes.

The central bank’s foreign currency reserves have expanded almost tenfold since March 2009, when it started its first round of purchases to prevent the franc from appreciating against the euro, the currency of the country’s main trading partners. Investors have been piling into the franc as they seek a haven from the global financial crisis.

Through its purchases, the SNB increases liquidity available to the country’s banks and consumers, raising the risk of price increases in the medium and long term. Still, Swiss consumer prices fell from a year ago for a 10th straight month in July. Jordan said in June that “in the foreseeable future, there is no risk of inflation in Switzerland.”

‘Serious Threat’
Switzerland’s export-led economy is resisting the global downturn. The unemployment rate has been below 3 percent since April 2011, bolstering private spending, and the KOF leading indicator increased for a sixth month in July. Still, export growth was flat in the second quarter and the government in June said “the recent deterioration in Europe poses a serious threat” to the Swiss economy.

Australia’s central bank today kept interest rates unchanged at a developed-world high, citing a domestic expansion that’s also weathering the global slowdown. The local currency touched the strongest in 4 1/2 months.

Governor Glenn Stevens and his board left the overnight cash-rate target at a 2 1/2-year low of 3.5 percent for a second month, the Reserve Bank of Australia said in a statement. Policy makers lowered rates by 1.25 percentage points from November to June, leaving borrowing costs “a little below their medium-term averages,” Stevens said.

In the U.S., confidence among chief executive officers declined in the second quarter as more business leaders said economic conditions will worsen in the next six months, a private survey showed.

The Young Presidents’ Organization sentiment index fell to 60 in the second quarter from 65.1 in previous three months, the largest decline since the survey began in 2009. Readings greater than 50 show the outlook was more positive than negative.

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