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Emerging markets leading the way - Views on News from Equitymaster
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  • Jun 5, 2009

    Emerging markets leading the way

    A couple of months ago, Indian business dailies carried snaps of investors and brokers, either standing outside the Bombay Stock Exchange (staring at the ticker) or sitting in their offices, with different expressions of anguish. It is quite the opposite nowadays. Well naturally, considering that the Sensex has moved upwards to cross the 15,000 mark.

    Nothing describes the word 'optimism' better than run up we have seen in the past three months. These have been the sentiments prevailing in emerging markets such as China, Brazil and India. As the IHT puts it 'Stock markets in developing countries are riding a wave of optimism.' In hopes that the global economy is recovering and that the developing nations worldwide are leading this recovery, markets have surged tremendously over the past few months.

    However, the gains recorded in India have been greater that those witnessed in Brazil and China. There have been various reasons for the same UPA coming back to power, improving auto sales and growth in production levels of core sectors amongst others.

    If we look at the chart below it gives a sense of how things have changed and how they differ between those of developed markets.

    Source:Yahoo Finance

    Record low interest rate regime continues in Europe

    The two most influential central banks in Europe decided yesterday to continue to keep interest rates at their extremely low levels. Also, they chose to give a further push to their asset buying programs that they have been conducting to stimulate their economies. The ECB (European Central Bank) decided to continue to keep its key interest rate at an ultra low level of 1% (which was 4.25% in October 2008). The Bank of England too kept its main rate unchanged at a record low 0.5% (down from 5% six months ago). It also extended its bond buying program totaling US$ 206 bn for two more months. ECB president Mr. Trichet felt that the current level of rates was "appropriate" given economic conditions. In its new GDP projections published yesterday, the ECB indicated that Europe's GDP would contract 4.1 to 5.1% in 2009. For 2010, the projected range was from a 1% contraction to growth of 0.4%.



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    1 Responses to "Emerging markets leading the way"


    Jun 6, 2009

    I have started to become skeptical about the rally now. I feel that the FIIs/Investment banks that couldn't sell out due to sudden fall in stock markets after Lehman bankruptcy are using this rally to 'pump and dump' stocks. Recently CITIGROUP sold its stake in Indian companies. If there is another trigger that leads to so called "flight-to-safety" (US treasuries) we might have fund houses like CITI selling stakes in holdings in India, not to mention the hedge funds that are ferociously buying now. Its heartening to see that Morgan Stanley is talking long term in India -- lets see if they walk the talk.

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