News with Tags "emerging markets"

Cyprus in last ditch EU talks to save economy

BRUSSELS/NICOSIA (Reuters) - Cypriot President Nicos Anastasiades held fraught last-minute talks with international lenders on Sunday as doubts grew about whether a deal could be reached to save the Mediterranean island from financial meltdown. Facing a Monday deadline to avert a collapse of Cyprus's banking system, Anastasiades spent hours arguing with the heads of the European Union, the European Central Bank and the International Monetary Fund over terms for a 10 billion euro ($13 billion) bailout after a first attempt collapsed last week.

Dell's board evaluates rival bids: source

(Reuters) - A special committee of Dell Inc's board is evaluating separate takeover proposals from Blackstone Group and billionaire investor Carl Icahn to decide whether either or both are likely to trump an existing $24.4 billion take-private deal, a source familiar with the discussions said on Sunday. Icahn and Blackstone put in preliminary bids late last week, potentially upsetting the plans of the No. 3 PC maker's founder, Michael Dell, and private equity firm Silver Lake to take Dell private.

Euro zone bailouts getting harder to agree: policymakers

SAARISELKA, Finland (Reuters) - Euro zone bailouts are getting tougher to agree as opposition within creditor nations grows and indebted states struggle to persuade citizens to back austerity, policymakers said on Sunday. At a meeting in Finnish Lapland this weekend, attendees including Ireland's Europe Minister Lucinda Creighton and host Prime Minister Jyrki Katainen sounded confident that Cyprus would secure a bailout deal to avoid financial collapse.

As euro zone suffers, emerging markets thrive

LISBON (Reuters) - No matter how Cyprus's financial drama ends, its troubles show yet again that rich countries enfeebled by the great financial crisis remain a weak link in the world economy. By comparison, emerging markets are not only looking stronger but are also contributing more consistently to global growth.

Global telecoms giant ZTE sees gold in Chinese roots

HONG KONG (Reuters) - China's ZTE Corp, which helped bring the telephone to millions of homes during the Deng Xiaoping era, is counting on a new generation of tech-savvy smartphone users to drive at least $7.5 billion of 4G network projects and elevate its sagging fortunes. Shenzhen-listed ZTE , founded in the mid-1980s, clinched its first major overseas contract in Bangladesh in the mid-1990s. Since then, it has been aggressively expanding overseas and challenging telecoms equipment manufacturers such as Ericsson and Alcatel-Lucent in emerging markets from Asia to Africa.

Analysis: The end of Indian IT staffing as we know it

BANGALORE/MUMBAI (Reuters) - India's IT outsourcers are promoting "mini CEOs" capable of running businesses on their own, while trimming down on the hordes of entry-level computer coders they normally hire as they try to squeeze more profits out of their staff. The shift by Infosys Ltd and others is symptomatic of a maturing industry that wants more revenue from its own intellectual property instead of providing only labor-intensive, lower-margin information technology and back-office services.

Europe may not solve debt woes in 10 years: China Finance Minister

BEIJING (Reuters) - China's new finance minister said on Sunday it was unclear whether the Euro zone would solve its debt problems over the next decade and suggested further turmoil would complicate efforts to reduce Beijing's fiscal deficits. Lou Jiwei said external difficulties might oblige China to run deficits for longer than anticipated as government expenditure was rising quickly and revenue growing only at a single-digit pace.

Switzerland denies banking deal in principle reached with U.S.

ZURICH (Reuters) - The Swiss government on Sunday denied a newspaper report that the country had reached a deal in principle with the United States over undeclared funds hidden by wealthy Americans in Swiss offshore bank accounts. "There is no agreed framework. The negotiations for an industry-wide deal to enable all Swiss banks to draw a line under the matter are ongoing," Swiss government spokesman Mario Tuor said in an emailed statement to Reuters.

Standard Chartered would consider Egypt buy, plans Iraq push

DUBAI (Reuters) - Standard Chartered would consider acquiring a bank in Egypt to ride an expected boom in one of the Middle East's largest economies, the firm's regional head said. The bank also plans to expand operations in Iraq this year. Many European banks are under pressure to cut costs and bolster their capital in the wake of the global financial crisis, but Christos Papadopoulos said such pressures would not deter Standard Chartered from growing in the Middle East.

IMF draft cuts 2013 U.S. growth forecast: report

MILAN (Reuters) - The International Monetary Fund (IMF) is planning to cut its U.S. growth forecast for this year due to higher taxes and spending cuts, Italian news agency ANSA said, citing a draft of the IMF's next World Economic Outlook report. The U.S. economy, the world's biggest, will expand 1.7 percent this year, down from the 2.0 percent predicted in January, ANSA reported late on Saturday. The next round of IMF forecasts is scheduled to be published in mid-April.

LONDON (Reuters) - Record high stocks? Currency surges? In the United States maybe, but across emerging markets, slowing economies and collapsing exports are hammering company profits far harder than in the seemingly hobbled West.

While world stocks have risen more than 5 percent already this year, led by Wall Street's surge to record highs, bourses from China to Brazil are flat to negative in dollar terms, unnerving those who fear a third year of stop-start performance.

To add insult to injury, most emerging market currencies are in the red against the U.S. dollar.

Given that major central banks are in full money-printing mode, the weakness is worrying, not least to the swathes of investors who have flocked in, lured by the promise of double-digit returns, robust growth and consumer demand.

Worrying maybe, but not surprising, says Martial Godet, head of emerging equity strategy at BNP Paribas.

Godet's calculations show a steep decline in return-on-equity (ROE) in emerging markets to around 12 percent, a fall of 3 percentage points in the last 18 months and well below pre-crisis levels of 16-17 percent.

That lags developed markets' 13.5 percent. But U.S. firms - "the ultimate quality and growth markets" in Godet's words - have usurped EMs' ROE supremacy with a 15 percent average. ROE shows how well a company is using shareholders' equity investment to generate profits.

"The deterioration has been both fast and large," he said.

"If you look at any of the criteria associated with profitability, you see that between 2011-2012 emerging markets were unable to transform economic growth into earnings growth."

Cash is still coming in - data from EPFR Global shows $33 billion in inflows to emerging equity funds in 2013, part of investors' so-called rotation out of bonds and into equities.

Most of this was soaked up by this year's new equity issues, totalling $30 billion according to Thomson Reuters data. But the ROE slump is a bad omen and inflows have started to stutter.

ING Investment Management for instance recently downgraded emerging markets holdings in its equity portfolio.

Robert Davis a senior fund manager at ING IM, notes flat corporate earnings in emerging markets last year despite revenue growth of around 12 percent.

Developed companies meanwhile have stayed profitable through years of economic doldrums, posting single-digit revenue growth in 2012 but managing a 2-3 percent rise in profits, he adds.

"Longer-term expectations of higher growth and demographics (in emerging markets) are valid, but what we have seen in the past couple of years is disappointment, because compared to developed markets, companies have been ... less able to protect their margins," Davis said.

BOTH ENDS

Of course, within emerging markets there are countries and sectors that will continue to do well. And despite negative earnings, MSCI's emerging stock index rose 15 percent in 2012.

But profit margins are being eroded from both ends.

First, emerging markets are bearing the brunt of economic slowdown, argue UBS analysts, noting that the EM growth "spread" over rich peers has fallen to a 10-year low of 3 percentage points. As exports shrink, that hits corporate topline revenues, countries' current account balances and currencies.

And because global growth and emerging corporate profits have tended to move in lock-step, a 3 percent expansion rate for the world economy may be insufficient to generate a recovery in emerging earnings growth, UBS tell clients.

Separately, JPMorgan Asset Management, which has also gone neutral on emerging stocks, points out that past episodes of worsening external balances - 1997-1999, 2005 and 2008-2009 - have also coincided with emerging equity underperformance.

"We will be watching two sets of data - trade and earnings delivery - to gauge whether to put on renewed active positions," JPMorgan AM's multi-asset strategy team told clients.

Secondly, the crisis has hammered home emerging firms' inefficiencies, compared to their developed counterparts.

Input costs, including investment and wages, may even have been exacerbated as governments tightened control over economies in order to revive growth. That's especially so in the Big Four, BRIC countries, China, India, Russia and Brazil, where stocks are lagging S&P500 returns for the fourth year in a row.

"After the crisis, U.S. and other developed market companies really tried to improve efficiency by investing less, deleveraging balance sheets, accumulating cash and conducting optimisation of their operations," Godet said.

"EM companies continued to invest as if the crisis of 2008 hadn't happened, as if growth was just as strong as before."

HIGH EXPECTATIONS

Prices are yet to reflect all the fears, moreover. Expectations for 2013 earnings growth stand currently at 13.5 percent, compared to 8 percent for the United States and Europe.

JPMorgan AM says that its own composite valuation index based on forward price-to-earnings, price-to-book, price-to-cash flow and dividend yields, indicates a 17 percent valuation premium over developed companies.

Emerging markets will need to show superior earnings performance to justify this premium, it adds.

Deutsche Bank analysts are pessimistic about this prospect.

Those buying emerging stocks after 2008 joined the party too late, they say, predicting in a note that the sector is only 27 months into what may be a multi-year period of underperformance.

(Editing by Susan Fenton)

LONDON (Reuters) - Record high stocks? Currency surges? In the United States maybe, but across emerging markets, slowing economies and collapsing exports are hammering company profits far harder than in the seemingly hobbled West.

While world stocks have risen more than 5 percent already this year, led by Wall Street's surge to record highs, bourses from China to Brazil are flat to negative in dollar terms, unnerving those who fear a third year of stop-start performance.

To add insult to injury, most emerging market currencies are in the red against the U.S. dollar.

Given that major central banks are in full money-printing mode, the weakness is worrying, not least to the swathes of investors who have flocked in, lured by the promise of double-digit returns, robust growth and consumer demand.

Worrying maybe, but not surprising, says Martial Godet, head of emerging equity strategy at BNP Paribas.

Godet's calculations show a steep decline in return-on-equity (ROE) in emerging markets to around 12 percent, a fall of 3 percentage points in the last 18 months and well below pre-crisis levels of 16-17 percent.

That lags developed markets' 13.5 percent. But U.S. firms - "the ultimate quality and growth markets" in Godet's words - have usurped EMs' ROE supremacy with a 15 percent average. ROE shows how well a company is using shareholders' equity investment to generate profits.

"The deterioration has been both fast and large," he said.

"If you look at any of the criteria associated with profitability, you see that between 2011-2012 emerging markets were unable to transform economic growth into earnings growth."

Cash is still coming in - data from EPFR Global shows $33 billion in inflows to emerging equity funds in 2013, part of investors' so-called rotation out of bonds and into equities.

Most of this was soaked up by this year's new equity issues, totalling $30 billion according to Thomson Reuters data. But the ROE slump is a bad omen and inflows have started to stutter.

ING Investment Management for instance recently downgraded emerging markets holdings in its equity portfolio.

Robert Davis a senior fund manager at ING IM, notes flat corporate earnings in emerging markets last year despite revenue growth of around 12 percent.

Developed companies meanwhile have stayed profitable through years of economic doldrums, posting single-digit revenue growth in 2012 but managing a 2-3 percent rise in profits, he adds.

"Longer-term expectations of higher growth and demographics (in emerging markets) are valid, but what we have seen in the past couple of years is disappointment, because compared to developed markets, companies have been ... less able to protect their margins," Davis said.

BOTH ENDS

Of course, within emerging markets there are countries and sectors that will continue to do well. And despite negative earnings, MSCI's emerging stock index rose 15 percent in 2012.

But profit margins are being eroded from both ends.

First, emerging markets are bearing the brunt of economic slowdown, argue UBS analysts, noting that the EM growth "spread" over rich peers has fallen to a 10-year low of 3 percentage points. As exports shrink, that hits corporate topline revenues, countries' current account balances and currencies.

And because global growth and emerging corporate profits have tended to move in lock-step, a 3 percent expansion rate for the world economy may be insufficient to generate a recovery in emerging earnings growth, UBS tell clients.

Separately, JPMorgan Asset Management, which has also gone neutral on emerging stocks, points out that past episodes of worsening external balances - 1997-1999, 2005 and 2008-2009 - have also coincided with emerging equity underperformance.

"We will be watching two sets of data - trade and earnings delivery - to gauge whether to put on renewed active positions," JPMorgan AM's multi-asset strategy team told clients.

Secondly, the crisis has hammered home emerging firms' inefficiencies, compared to their developed counterparts.

Input costs, including investment and wages, may even have been exacerbated as governments tightened control over economies in order to revive growth. That's especially so in the Big Four, BRIC countries, China, India, Russia and Brazil, where stocks are lagging S&P500 returns for the fourth year in a row.

"After the crisis, U.S. and other developed market companies really tried to improve efficiency by investing less, deleveraging balance sheets, accumulating cash and conducting optimisation of their operations," Godet said.

"EM companies continued to invest as if the crisis of 2008 hadn't happened, as if growth was just as strong as before."

HIGH EXPECTATIONS

Prices are yet to reflect all the fears, moreover. Expectations for 2013 earnings growth stand currently at 13.5 percent, compared to 8 percent for the United States and Europe.

JPMorgan AM says that its own composite valuation index based on forward price-to-earnings, price-to-book, price-to-cash flow and dividend yields, indicates a 17 percent valuation premium over developed companies.

Emerging markets will need to show superior earnings performance to justify this premium, it adds.

Deutsche Bank analysts are pessimistic about this prospect.

Those buying emerging stocks after 2008 joined the party too late, they say, predicting in a note that the sector is only 27 months into what may be a multi-year period of underperformance.

(Editing by Susan Fenton)