The central bank is an institution that manages a nation’s currency, money supply and interest rates. The central bank also oversees a nation’s banking system and is the lender of last resort in a time of crisis. The central bank is normally a separate body from the political establishment. The central bank’s goal is to create stability and low inflation in the system.
When the U.S. equities market crashes, most foreign stocks do as well. But when it comes to capital appreciation, the correlation ends. Domestic Chinese stocks experienced a small resurgence lately, but they are still well down from their peak in 2007. China is still very much an emerging market, but several other emerging markets are doing much better. These economies are experiencing growth in domestic demand and are also selling a lot of product to their neighbors, China and Japan.
Thailand (the second largest economy in Southeast Asia) is actually an emerging market that is a better play than China itself. And, of course, you have lots of options as an investor if considering having some exposure to the region.
The iShares MSCI Thailand Capped Invstbl Mkt exchange-traded fund (ETF), symbol THD, has been on a tear lately, representing the broader stock market in Thailand. This ETF has about a billion dollars in net assets and is up approximately 38% year-to-date. Way better than China.
Things are really happening in Thailand. According to Thomson Reuters, this emerging market experienced 2012 fourth-quarter GDP growth of 3.6%, with strong domestic demand and an 18.2% increase in exports. Private consumption grew 12.2% during the quarter and both the government and central bank expect a solid increase in global trade this year.
Another emerging market experiencing a big increase in both domestic demand and exports to China is the Philippines. Pull up the iShares MSCI Philippines Invstbl Mkt Idx ETF, symbol EPHE, and you’ll see a huge spike over the last year. According to Bloomberg, that country’s 2012 fourth-quarter GDP grew 6.8% on … Read More
Developing countries are supposed to be the fastest growing world economies. Sadly, according to a recent report by the World Bank, in 2012, developing countries put in their slowest economic growth rate in a decade. Developing countries saw their economic growth come in at only 5.1% for 2012. (Source: The World Bank, January 15, 2013.)
How about the more developed countries in the global economy?
“High income” countries in the global economy are estimated to have grown by only 1.3% in 2012. In 2013, this growth rate is expected to remain the same.
Gross domestic product (GDP) growth in Europe and Central Asia is expected to have slowed to below three percent in 2012 from 5.5% in 2011. Similarly, Latin America and the Caribbean are expected to see their GDP grow only three percent in 2012, compared to 4.3% in 2011.
Add it all up, the World Bank estimates that, in 2012, the overall global economy grew at only 2.3% and it expects the same rate for 2013.
Dear reader, I don’t want to be the bearer of bad news, but the numbers don’t lie. The risks in the global economy persist. The combination of a recession-infested eurozone, a slowing economy in China, a depressing Japanese economy, a disappointing U.S. economic performance, and the struggles of the other emerging market economies points to bleak world economic growth for 2013.
Even the world economies that were once the strongest are in trouble. The central bank of Germany slashed its GDP growth prospects. It expects Germany’s GDP to increase by only 0.4% in 2013 compared to a previously forecasted increase of … Read More
The amount of bearish sentiment towards gold prices these days on the part of investors is not surprising to me. Investors often work in herds, moving to “hot” sectors from “weak” sectors very quickly. But, as I have said all along, the “gold play” is a long-term one, not a speculative one.
Economics 101: if demand for an asset or item increases, prices rise. If supply of an asset or item increases above demand, prices fall.
Gold prices follow the same historical economic principle. If we see demand for gold increasing, we can assume prices will also rise, because the supply of gold is limited.
At present, and as I have said in these pages many times before, there is fundamental demand for gold. Central banks and investors alike are hunting for and buying physical gold.
To give you some idea on the strength of gold buying, according to the Census and Statistics Department of the Hong Kong government, gold imports by China from Hong Kong doubled in the month of November 2012 from the prior month. China bought 90.764 metric tons of gold in November compared to only 47.478 metric tons in October of 2012. (Source: Bloomberg, January 8, 2013). Compared to the first 11 months of 2011, for the first 11 months in 2012, Chinese imports for gold also doubled.
Now let’s look at gold demand by the central banks. To say the least, they are running towards gold like never before. Why? Because their printing presses are in overdrive mode. Central banks need to have some physical gold to back their ever-increasing supply of paper … Read More
Economics 101: if countries trade with each other, it means there is demand in the global economy. On the other hand, if the trade decreases, demand can be construed as slowing and economic growth as uncertain.
Currently, exports from the countries that are known for their trading in the global economy are declining at a staggering pace—it’s not only one or two countries, but rather entire regions across the global economy.
According to a study released by the Inter-American Development Bank (IDB), exports from Latin America to the global economy grew by 1.5% in 2012. Sadly, in 2011, exports from the same region to the world increased by 26% and, in 2010, they saw a rise of 29%. (Source: The Costa Rica News, December 19, 2012.)
Similarly, China has been witnessing a slowdown in its exports, making its economic growth uncertain. As reported by the General Administration of Customs, China’s exports to the global economy in the first 11 months of 2012 grew by 7.3%. In the same period of 2011, the Chinese economy witnessed growth of 21.1% in its exports. (Source: China Daily, January 8, 2013.) The export growth rate for China was more than 65% lower in the first 11 months of 2012 over the first 11 months of 2011.
The Japanese economy, the third largest in the global economy, saw its exports to China decline by 14.5% in November 2012 alone, as demand for products such as automobiles and construction equipment became stagnant. (Source: China Economic Review, December 20, 2012.) The central bank of Japan is now resorting to printing money, to weaken … Read More
It seems the media has gone quiet about the eurozone credit crisis, as I don’t hear much about it these days in the mainstream news. Maybe they are relieved about the European Central Bank’s (ECB) announcement about its plan to do whatever it takes to save the eurozone—even if it includes printing more money.
Read it here and read it loud: the eurozone credit crisis is far from over. Its economic slowdown is only going to get worse.
The unemployment rate in the eurozone reached another high in November of 2012—11.8 % compared to 10.6% a year earlier. In October, the unemployment rate in the eurozone was 11.7%. (Source: Associated Press, January 8, 2013.)
Particularly hard hit has been Greece, as its unemployment rate hit a record 26.8% in October. The unemployment rate for youth aged 15 to 24 is 56.6%. A record 1.34 million Greeks are unemployed. (Source: ELAST, January 10, 2013.)
The stronger nations in the eurozone are weakening at an accelerated pace. Consider Germany. Factory orders there fell more than expected, down 1.8% in November of 2012 from October. (Source: Bloomberg, January 8, 2013.) Germany is a major economic hub of the eurozone, but it’s not safe from turmoil in the region.
My question: what happens to the eurozone economy if Germany deteriorates further? The eurozone is in a recession for the second time in four years.
The economic slowdown in the eurozone due to its credit crisis is more severe than it appears on the mainstream news. People are affected across the board. Birth rates are falling. In Portugal, the number of births in … Read More
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