While US economy is cruising along its journey towards slowdown, how will the emerging economies and Asia be impacted? Will these economies continue to flourish?
The consensus evolving amongst the bulls in the emerging markets is that, as US slows down, more and more capital will flow into emerging markets and hence US slow down is indeed the good news! This hypothesis would be ok only if the developing economies are insensitive to US economy, i.e. they are driven primarily by their own internal consumption and not on account of exports.
Let's look at the export numbers of some of the emerging economies:
China:
Exports (2006-07): $ 974 billion
Exports (2006-07) as a % of GDP: 37% approx
Exports by region (2007-08): EU (20%), USA (19%), HK (15%), Japan (8%), Asean (8%)
Source: Wikipedia
India:
India has seen her exports grow at 20% over the last few years.
Exports (2006-07): $ 125 billion
Exports (2006-07) as a % of GDP: 15% approx
Exports by region: EU (22%), Africa (19%), North America (16%), Asia (24%)
Exports by Industry: Engg Goods (20%), Petro Products (16%), Chemical (14%), Gems & Jewllery (13%), Textiles (13%)
Source: Department of Commerce
Brazil:
Exports (2006-07): $ 138 billion
Exports (2006-07) as a % of GDP: 13% approx
Source: Wikipedia
Russia:
Exports (2006-07): $ 317 billion
Exports (2006-07) as a % of GDP: 18% approx
Exports by region (2007-08): Netherlands (10%), Germany (8.3%), Italy (7.9%), China (5.5%), Asean (8%)
Source: Wikipedia
China could be the hardest hit by slowdown in USA. And countries such as Brazil, Russia, and India may continue to grow based on their domestic demand and may continue to attract global capital.
Showing posts with label India. Show all posts
Showing posts with label India. Show all posts
Monday, October 29, 2007
Wednesday, September 19, 2007
Are our markets too optimistic?
Rupee is trading at sub 40 level against dollar. And I wonder why are our markets headed northwards.
While after the rate cut by 50 basis points in US, stock markets across the globe have shown high degree of buoyancy, there are whispers that one hear about how Bernanke has just declared a war on dollar. Crude is already beyond $80 a barrel. Some oil traders expect the crude to touch $100 in about 6 months. CNBC also reported in the morning that US treasury is likely to bust the credit limit of US $8.9 trillion (debt of the US government) by 1st October. So now they will approach US congress to issue more bonds. Very aggressive (or should I say desperate) rate cut also is an indication that probably US is headed for or is already in the middle of recession. Increasing crude prices, increased money supply, weak consumer confidence would certainly push US economy into recession if it is already not in one.
A weak US economy would hit IT companies and our exporters. Even FII inflows & FDI may dry-up. And add to that the fears of return of sub-prime, unwinding of yen carry trade, and upcoming general elections. All these indicate a chaos in the financial markets in India over next 4-6 months. Am I just being too pessimistic? Is it wise to be too optimistic about stocks in the short term?
While after the rate cut by 50 basis points in US, stock markets across the globe have shown high degree of buoyancy, there are whispers that one hear about how Bernanke has just declared a war on dollar. Crude is already beyond $80 a barrel. Some oil traders expect the crude to touch $100 in about 6 months. CNBC also reported in the morning that US treasury is likely to bust the credit limit of US $8.9 trillion (debt of the US government) by 1st October. So now they will approach US congress to issue more bonds. Very aggressive (or should I say desperate) rate cut also is an indication that probably US is headed for or is already in the middle of recession. Increasing crude prices, increased money supply, weak consumer confidence would certainly push US economy into recession if it is already not in one.
A weak US economy would hit IT companies and our exporters. Even FII inflows & FDI may dry-up. And add to that the fears of return of sub-prime, unwinding of yen carry trade, and upcoming general elections. All these indicate a chaos in the financial markets in India over next 4-6 months. Am I just being too pessimistic? Is it wise to be too optimistic about stocks in the short term?
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