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Real Time Insight

Weekend news from the emerging world painted a mixed picture for growth.  Here are a few points of interest:

September new yuan loans in China rose CNY 787 bln [cny650 bln forecast], while September CPI rose 3.1% y/y [2.9% expected]. Food prices, lifted by weather, contributed to the strength in CPI. Lending is firm and inflation is still below the 3.5% target.

Chinese September exports contracted 0.3% y/y [8.1% expected] and imports expanded 7.4%y/y [9.6% forecast].  Trade activity is slow.

Chinese September auto and light truck sales surged 21% y/y to 1.59 mlu.  This was the highest volume level since January’s gain of 1.73 mlu. The Association of Automobile Manufactures believes that more than 20 mlu will be sold this year.

Looking to India, September WPI rose 6.46% y/y [6.0% expected] and September CPI expanded 9.84% y/y [9.6% forecast].   WPI has climbed from a recent trough near 4.58%. Inflation is sticky in India and the economy remains stuck in a high inflation/low growth scenario.

The Russian central bank kept interest rates unchanged. In the press release, it made the following statement: “The dynamics of the key macroeconomic indicators suggested that the pace of economic growth remained low. Production activity and investment demand remained subdued. Producer confidence indicators continued to deteriorate. At the same time the unemployment rate stayed at the relatively low level. Consumer demand supported by the real wage and retail lending growth remained the major driver for the economic growth. Nevertheless, given subdued investment activity and sluggish recovery of external demand, the Bank of Russia expects economic growth rate to remain low in the medium term.”

As an indicator of EM stock market pricing, the MSCI Emerging Markets ETF (EEM - ETF report) continues its two year range between the mid $30’s and mid $40’s.   Although it is near the upper end of the range, there are few signs of a breakout.

RTI Question:  What is your view on EM investing into year end?  Pick your return profile:

1) A loss of more than of 2.5%

2) A loss between 0% and 2.5%

3) A gain greater than 0% but less than or equal to 2.5%

4) A gain greater than 2.5%

5) Pick your own return – put a number on it

Let me know your thoughts below:

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