State of emerging market economies in February 2018


The stock market and economy move in sync over the medium-long term. That’s why it’s extremely important to understand the state of a nation’s/region’s economy. Is the economic data improving or deteriorating?
Let’s take a look at emerging market economic data as of February 2018.

China

China is the main driver for emerging markets. Many of the BRICs and other emerging markets are exporters to China.
Manufacturing PMI
China’s manufacturing PMI has been flat over the past 1.5 years as China transitions from a manufacturing-based economy to a service-based economy.

Non-manufacturing PMI
China’s non-manufacturing PMI is slightly trending higher.

New Orders
China’s New Orders have been slightly trending higher over the past few months.

Leading Economic Index
China’s Leading Economic Index continues to go higher. This is long term bullish for the Chinese economy and stock market.

Consumer Confidence
Although Chinese Consumer Confidence has been flat over the last 2 months, it is generally trending higher.

Conclusion
China’s old economy – manufacturing – has plateaued and most likely will not experience a surge in growth over the next few years. China’s new economy – consumption & services – continues to grow at a healthy rate.
Economic growth is slow but steady. This is a long term bullish factor for the Chinese stock market. Here’s SSE (Shanghai stock index).

Brazil

Brazil is one of the BRIC’s.
Unemployment
Brazil’s unemployment rate is going down.

Inflation
Brazilian inflation is on the rise after tanking in 2016 and the first half of 2017.

Producer Prices
Like inflation, Brazilian Producer Prices % Change is slowly coming back up after a recession in 2016.

Business Confidence
Brazilian Business Confidence continues to surge.

Industrial Production
Brazil’s Industrial Production has been flat over the past few months but is generally trending higher.

Consumer Confidence
Unlike Brazil’s other economic indicators, Consumer Confidence is trending lower!

Retail Sales
Brazil’s YoY Retail Sales growth is picking up steam.

Conclusion
Brazil’s economic data is improving as it climbs out of its worst recession in history. In other words, Brazil’s economic expansion still has a lot of room to go. This is a long term bullish factor for the Brazilian stock market. Here’s Bovespa (Brazil stock index).

Russia

Russia’s economy is heavily dependent on commodity exports (oil, natural gas, etc).
Unemployment
Russia’s unemployment rate has been flat over the past 3 months, but is generally trending down.

GDP growth rate
Russia’s YoY GDP growth rate is going up as oil prices rise.

Inflation
Russian inflation continues to trend lower.

Industrial Production
Industrial Production is trending lower.

Consumer Confidence
Russia’s Consumer Confidence Index is improving.

Retail Sales
The YoY growth in Retail Sales is trending higher.

Conclusion
Russia’s economy is dependent on energy exports. The Russian economy is improving because oil prices are up year-over-year. With oil prices in a long term bull market, the Russian economy should improve over the next few years. This is a long term bullish factor for the Russian stock market. Here’s MOEX (Russian stock index).

India

India is very different from other emerging markets. India isn’t as influenced by China’s economy as e.g. Russia, Brazil, Southeast Asia, etc.
More importantly, India’s economic data is not very good:

  1. There’s not a lot of historical data
  2. There’s a lot of statistical noise in the available data.

Inflation
Indian inflation continues to trend higher.

Producer Prices YoY % change
The YoY % change in Producer Prices is flat.

Business Confidence
India’s Business Confidence is generally trending higher.

Stock market
Here’s India’s NSE Nifty 50 (stock index).

Leave a Comment