Emerging Markets Growing Strong as Discussion on Fiscal Cliff Advances

For the first time in last 8 days, the stocks of emerging markets saw a rise thanks to Obama’s expression of confidence on reaching an agreement on Budget with Congress. In the MSCI Emerging Markets Index, Turkish Airlines surged the highest in last 3 years. Its cooperation discussions with Deutsche Lufthansa AG are currently going positive and the earnings also surpassed the estimates. The 3rd quarter net income of this airlines company catapulted by 39% and the analysts are now expecting a profit of 452 million-lira for the company.

The 2nd largest Gas Company of Russia, OAO Novatek also showed the most advancement in last 7 weeks. The announcement that the OAO Novatek officials made on starting the $600 million Share Buyback Program seems to have helped the company in a big way. The Micex Index of Russia also added 1.1% more and it is the biggest jump for the index in this month.

On the other hand, the largest lender of Hungary, OTP Bank Nyrt. didn’t have similar fate. Its share prices plummeted for a 3rd straight day (The latest slid being of 2.1%) as the Hungarian Government confirmed the permanent nature of the special bank tax. The Hungarian Government is on its quest to keep the budget deficit within 3% as set by the European Union. The newly implied levy puts higher duties on utility and energy companies.

The emerging market gauge in New York has gained 0.6% and is at 975.38 currently. This was on a 7 day losing streak and it even reached its lowest in the last 10 weeks. However, thanks to Obama’s announcement, it was able to rebound. Incidentally, there are 21 countries in the MSCI emerging-market index and they jointly export around 17% goods to US only. Without a doubt, any news regarding US economy is bound to affect these countries as well.

According to Geoffrey Ng, the Chief Executive Officer of Hong Leong Asset Management Bhd., as bipartisan talks on the fiscal cliff is seeing progress; this has bought a sort of technical relief in the market. He added that investors are quite apprehensive of a possible quick fix to the US fiscal cliff issue.

Incidentally, in 2012, The MSCI Emerging Markets Index has jumped on a whole by 6.5%. The MSCI World Index for developed countries however showed more improvement as the same has so far surged by 6.7% in this year. The emerging-markets gauge trades are currently at more than 11.2 times of the initially estimated profit, if it is compared with that of MSCI World’s 13.

Among other countries, the Bovespa Index of Brazil rose by 0.9%. This marks the biggest gain for the index since 6th of this month. The state-controlled oil company of Brazil, Petroleo Brasileiro SA showed jump of 1.6% and this possibly attributed largely to the positive movement of the Bovespa Index.

KOSPI of South Korea also climbed up by 0.9%. The major currency of the country, Yon also gained 0.5% and reached to 1086.98 per USD. This is a big rebound for the currency as last week; it showed the worst results within last 4 months. Kangwon Land Inc., a hotel services and casino provider rose by 5.1% in South Korea. This is the biggest jump of the company since last year’s September. There is further good news for the company. Though any official confirmation is yet to be provided, according to reports of a certain newspaper, The Ministry of Culture of South Korea is going to approve the plan of the company to increase slot machines and casino tables. Samsung Electronics Co Ltd also surged by 1.9%, its most since 2nd of this month.

In Hong Kong, Cosco Pacific Ltd. saw increase in its share prices by 5.9% marking the company’s biggest gain since 14th September. Parkson Retail Group Ltd., on the other hand, sank by 8.8% as according to reports, it suffered a decline of 42% in its 3rd quarter earnings. Parkson Holdings Bhd., its parent company also plummeted by 4.8%.