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With hedge fund manager, CNBC regular and long-time veteran of the Russian markets Tim Seymour at the helm, Emerging Money (http://www.emergingmoney.com) provides education, trading analysis and comprehensive views of emerging markets around the world. As economies in the BRIC group and beyond... More
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  • The Emerging Money week ahead with Tim Seymour: playing the inflation story 11-12-10

    Inflation has moved from a non-issue to the star of the global macro story, and given what we saw in China on Friday, the inflation trade only gets hotter from here. Here are a few factors to watch.

    China. Shanghai’s 5% plunge was one of last week’s top market stories and will continue to fuel gossip as we try to figure out just what happened. Was it a dark sign of a new correction or just a one-off excuse to lock in profits?

    Watch weekend policy moves from the People’s Bank of China (PBOC) to see what aspects ofinflation  they go after and how aggressively they move. In the meantime,  yuan  appreciation this week was a welcome sign to the markets and there is a sense that Beijing is serious this time about letting the currency float up to its natural value. Did Tim Geithner and company set them on the path to righteousness at the G20 summit? Dubious. It simply makes sense to decouple the strong yuan from the weak dollar, but they — and nobody else — need to be the ones to express this view. (Kind of like your 2-year-old daughter here.)

    Food inflation  in emerging markets is a theme we have been early and accurate on. Watch out: The poor October numbers that came out this week included  BrazilTurkeyChinaIndia. What does this mean for policy in these markets? Can they actually increase the interest rates that have already gotten a flood of fixed-income investors to send money? I think the food wars have only begun to simmer.

    Earnings last week from  Brazil  were largely fantastic. Look across the  consumer  space and you can see demand. Look across valuations and you can also see consumer and retail names in Brazil and throughout emerging markets are not cheap. Are people looking to buy weakness or book profits? I would say the former, but longs who have been hiding out here could get hurt if this week’s pullback intensifies.

    Oil  is close to $90, which is boom time for big integrated players. The big movers in the lagging large-cap emerging markets oil trade have been the China plays:  CEOPTR  and SNP. Are  PBR and  OGZPY next? Talk about missing the party… These were the most popular stocks in emerging markets from the last rally, but now have been orphaned. If people ever get back to their old weighting in these names, look out for long-hanging fruit.

    GM  is celebrating its return to the markets next week with the second IPO of its long corporate history. GM now stands for “Global” Motors. That’s our view and the view of the company, which apparently in its road show has been only playing up its foreign assets. They should. GM is far ahead of most of the  car  field internationally.

    I think they can hold their ground in most places and have taken a good approach in China, which is via joint ventures with large local players. You will not get pushed out by the government as fast and will be around longer to play — until they no longer need you, of course. The global auto trade is something we will continue to get lathered about into next year, so stay the course.  TTMTMVLKAYDDAIFHMC — all major players and all reporting strong growth in emerging markets.  Get ready for the flood of attention on this IPO.

    Finally, we will be going live on Thursday with another Emerging Markets half-hour prime time special of  Trading the Globe. Tune in at 7:30 ET to get a look at Goldman’s  Jim O’Neill  himself — inventor of the  BRIC  — and I talking about the next wave of BRIC countries, growth targets and what developed investors are missing about emerging markets. Plus we will go deeper into “unchartered waters” of  South Korea  — “the new  Japan” — and explore the next release from the Ambassadors index: a global media play that is focused on Latin America.



    Disclosure: no positions
    Nov 13 9:48 AM | Link | Comment!
  • Satyam founder Ramalinga Raju turns himself in

    Local Indian papers are reporting that the founder of disgraced computer company Satyam has surrendered to police custody after the court denied his offer to post bail.

    Ramalinga Raju reportedly turned himself in to the Hyderabad authorities, signaling that the sad case of Satyam (SAYCY) is reaching its last phase.

    Raju founded the company in 1987, only to admit last January that years of cooking the books had overstated its profits by as much as $1.5 billion over the long term.

    Although he received permission to post bail in August, the Indian supreme court recently cancelled that freedom. Now Raju and five other top employees are back in official custody ahead of what will become India’s biggest securities fraud trial ever.

    SAYCY was eventually sold to rival Tech Mahindra in a very public auction a few months after the extent of its falsified accounting became clear. Since then, the company has been renamed Mahindra Satyam to indicate its corporate affiliation — and last month the ADR was finally stripped of its NYSE listing, pushing it back onto the pink sheets.

    Investors in the company remain understandably bitter, especially since without a NYSE listing, trading their ADR shares is difficult or even practically near-impossible. The only real alternative is an Indian brokerage account, which has its own logistical problems.

     

     

    Disclosure: no positions
    Nov 10 9:39 AM | Link | Comment!
  • Can China get too hot for comfort?

    Wednesday night brings new inflation numbers from China. After months of fretting about Asia getting too cold to keep the global economy going, get ready to see concerns that it is too hot.

    Xinhua, the official Beijing news agency, is warning people that  Chinese  inflation  will reach a peak above 4% early next year. Local economists expect pricing pressures to become “great” in the first quarter before receding.

    More immediately, consensus is that the consumer price inflation gauge will surge to 4% as early as tomorrow night. Last month, the CPI hit a two-year high of 3.6%.

    Given Beijing’s stated target of 3% for inflation — anything higher would cause mass unrest, they claim — this could be a real test of everyone’s nerves. Food inflation in particular has been a source of unease, since while the housing market can be regulated fairly directly, outright food shortages can be difficult to control.

    Investors will definitely react to signs that this “Goldilocks” economy is too hot to keep prices stable. Not only does the threat of inflation create real risks that Beijing will intervene to raise interest rates aggressively — cooling the economy — but the prospect of political unrest may be unwelcome to all.

    If you think the data will come in on the hot side, the small-cap sector will be especially exposed to any sudden moves from Beijing. That would be bearish for funds like  HAO:

     

    Disclosure: no positions
    Tags: HAO, China, inlation, CPI
    Nov 09 10:56 AM | Link | Comment!
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