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e*n
发帖数: 1511 | 1 http://online.wsj.com/article/SB1000142405274870378570457564263
BY TOM LAURICELLA
While many investors have been fixated on the European debt crisis, concerns
have been quietly building about the potential for inflation problems in
emerging markets.
The fear isn't that emerging-market countries will return to the kind of
hyperinflation that was so damaging in the past. Rather, the worry is that
high food and energy prices, combined with capacity constraints and the
Federal Reserve's easing move in the U.S., will force emerging-market
central banks to raise interest rates more aggressively than is currently
expected.
That's especially the case in some Asian countries, which are seen as having
kept interest rates inappropriately ... | K********g
发帖数: 9389 | 2 呵呵呵。
该涨的还得涨
该跌的就要跌
concerns
【在 e*n 的大作中提到】
: http://online.wsj.com/article/SB1000142405274870378570457564263
: BY TOM LAURICELLA
: While many investors have been fixated on the European debt crisis, concerns
: have been quietly building about the potential for inflation problems in
: emerging markets.
: The fear isn't that emerging-market countries will return to the kind of
: hyperinflation that was so damaging in the past. Rather, the worry is that
: high food and energy prices, combined with capacity constraints and the
: Federal Reserve's easing move in the U.S., will force emerging-market
: central banks to raise interest rates more aggressively than is currently
| w******s
发帖数: 16209 | 3 here is the full article:
Emerging Wild Card: Inflation
By TOM LAURICELLA
While many investors have been fixated on the European debt crisis, concerns
have been quietly building about the potential for inflation problems in
emerging markets.
The fear isn't that emerging-market countries will return to the kind of
hyperinflation that was so damaging in the past. Rather, the worry is that
high food and energy prices, combined with capacity constraints and the
Federal Reserve's easing move in the U.S., will force emerging-market
central banks to raise interest rates more aggressively than is currently
expected.
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That's especially the case in some Asian countries, which are seen as having
kept interest rates inappropriately low because of concerns about the
strength in their developed-market trading partners, such as the U.S.
[ABREAST]
"They probably have let inflation go further than they otherwise would,"
says Robert Horrocks, chief investment officer at emerging-markets
specialists Matthews Asia Funds. As a result, "there is a real risk that
these economies get overheated."
That could throw a monkey wrench into the expectation that emerging-market
assets and commodity prices will rise as investors chase high-yielding
assets. It could also create periods of disruption that send investors to
safe-haven assets like the U.S. dollar, defying broad-based expectations
that emerging-market currencies will rise.
"Over the next six months, the biggest single issue investors will need to
factor into their decisions is how inflation is likely to affect the
landscape," says Richard Yetsenga, global head of emerging-markets currency
strategy at HSBC in Hong Kong.
One main reason investors haven't been concerned about inflation in emerging
markets is that economic growth has been slower than expected in a number
of key countries, such as Indonesia and Malaysia.
Still, expectations are for a rebound in emerging-market economies in 2011.
A number of them, such as India, are seen as already operating at full
capacity.
China, facing an inflation rate of 4.4%, has already moved more aggressively
to tighten monetary policy than many had expected. Reflecting China's
importance today, a mid-October rate increase sparked a selloff in global
stock markets and a flight into so-called safe-havens such as the U.S.
dollar.
There's a "growing urgency" among Chinese officials to get monetary policy
to a more appropriate stance, analysts at RBC Capital Markets wrote in a
research note published Friday.
"This should prompt more decisive action in the weeks and months ahead,"
including multiple interest-rate increases, the RBC note predicted.
China's tightening, and expectations for more, have contributed to declines
in Chinese stocks, with the Shanghai Composite Index down 12% this year.
But other Asian stock markets are still enjoying healthy gains. Indonesian
shares are up 44% this year, Thai stocks are up 35%, and the main stock
indexes in India and Singapore are up more than 9%.
As a result, says Matthews's Mr. Horrocks, "there's no valuation cushion"
for stocks should central banks of these countries become more aggressive
than expected in tightening monetary policy. "Valuations are anywhere from
10% to 20% above long-term averages," he says.
One reason that China and other Asian emerging-market central banks could
start ratcheting up the pace of tightening is that interest rates remain
near low levels set in the wake of the 2008 financial crisis, even though
many of those countries weren't hit as hard as developed economies.
That's clear in looking at real interest rates, which are interest rates
minus the rate of inflation.
When real interest rates are negative, that is seen as a sign of very easy—
and potentially inflationary—monetary policy.
Based on officially set rates, in South Korea the real interest rate is
negative 1.6% and in Singapore it is negative 3.3%—both very accommodative
levels, notes Natalia Gurushina, director of emerging-markets strategy at
Roubini Global Economics. In contrast, she says, the real interest rate in
Brazil is 5.6%.
"On average in emerging Asia…there's more room to normalize rates," Ms.
Gurushina says. This should play out first with higher long-term interest
rates—and lower bond prices—in countries facing inflation pressures.
Yields would then move higher across all maturities as monetary-policy
tightening becomes more aggressive.
For emerging-market economies, food and energy prices play a bigger role in
inflation pressures than in developed economies. This has been a big problem
for countries such as Indonesia, where inflation is at 5.7%, and India,
which saw inflation surge well into the double digits over the summer before
settling back to 8.6% in October.
As a result, the more that food and energy prices rise, the more
aggressively those central banks may step on the brakes.
"People are not focused enough on the rise in commodity prices…and what
that does in emerging-market economies," says Ruchir Sharma, head of global
emerging-markets equities at Morgan Stanley Investment Management. "Beyond a
certain point, a rise in commodity prices is not conducive to emerging
markets."
In particular, Mr. Sharma is concerned about oil prices, which finished last
week just south of $84 a barrel. "If the price of oil were to get back up
to $90 per barrel, I would be turning more cautious," he says.
One conundrum for investors is how more aggressive tightening would play out
in the currency markets. Most investors have been operating on the
assumption that with the Fed keeping interest rates at zero for the
foreseeable future, any moves by emerging-market countries to raise interest
rates would attract even more money from yield-hungry investors.
This is an especially important question for investors who have been piling
in to emerging-market bonds priced in local currencies. Many argue it's a no
-lose situation, where even if bond prices fall because of inflation
pressures, rising emerging-market currencies will still provide them a
profit.
But since China tightened in October, the dollar has been on the upswing,
albeit with help from concerns about the European debt crisis. In the
current market environment, however, higher interest rates in China have
been equated with risk aversion, and thus a stronger dollar. The U.S. dollar
index is up roughly 4% since mid-October.
Traders say that until expectations for emerging-market rate increases
become more widespread, they could continue to prompt safe-haven buying of U
.S. dollars. |
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