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- Brazil risks becoming latest emerging-market victim of stagflation as economy falters /Euromoney magazine
Brazil’s recovery is being cut off at the knees by a set of economic challenges that have all come home to roost – from a depreciating currency and rising current-account deficit to structural problems, including an overdependence on credit-fuelled consumption.
Brazil has failed to capitalize on the era of abundant global liquidity to boost its investment climate and embark on supply-side structural reforms while nurturing domestic business confidence, say analysts.
The global emerging market (EM) rout appears to have awoken the government from its reformist slumber and has highlighted the need to rebalance the economy away from debt-fuelled consumption in favour of investment.
However, the violent cyclical sell-off is colliding with these reform efforts in the short-term as fears grow the economy is marching towards stagflation.
- Robust demand for Warsaw offices in H1 2013 | Commercial Briefing
3 September 2013. By Christopher Babatope.
The Warsaw office market continued to experience robust occupier demand in H1 2013, despite weaker economic growth in Poland.
Take-up figures were healthy in the first half of the year and place Warsaw on track for a strong level of annual take-up, according to Knight Frank’s Warsaw Office Market Report.
- Emerging Economies’ Misinsurance Problem by Gene Frieda – Project Syndicate
By Gene Frieda. Sep. 2, 2013.
LONDON – Over the last decade, America’s expansionary monetary policy and China’s rapid growth have been the two key drivers of global financial flows. Now, both dynamics are being reversed, generating new risks for the global economy – particularly for emerging countries. Whether they can cope with these changes will depend on whether they have taken out enough insurance against the right risks.
Following the Asian financial crisis of the late 1990’s, emerging economies began to accumulate massive foreign-exchange reserves to protect themselves against the risks of external over-indebtedness. In fact, they amassed far more than they needed – $6.5 trillion, at last count – effectively becoming over-insured against external balance-of-payments shocks.
But they remained underinsured against domestic credit risks – the leading threat to emerging economies today. After the global financial crisis erupted in 2008, interest rates plummeted, fueling private-sector credit booms in many of the largest emerging markets, including Brazil, India, Indonesia, and Turkey.
Although these booms were initially financed by domestic capital, they soon became dependent on foreign capital, which flowed into their economies as advanced-country central banks pumped huge amounts of liquidity into financial markets. Now, just as the US Federal Reserve contemplates an exit from its unconventional monetary policies, emerging economies’ current-account positions are weakening, making their reliance on capital inflows increasingly apparent – and increasingly dangerous.
Definitely read the rest of the article.
Meanwhile, China’s shadow-banking system has expanded at an unprecedented rate. But here, too, mounting risks have been largely ignored, owing partly to the collateralization of real property, which is believed to retain its value permanently, and partly to the system of implici t government guarantees that backs loans to local governments and SOEs.
At the very least, the combination of higher interest rates in the shadow-banking sector and weaker nominal GDP growth undermines borrowers’ debt-repayment capacity. In a worst-case scenario, falling property prices or diminishing faith in implicit government guarantees would compound the risks generated by the shadow-banking system, severely undermining China’s financial stability.
- Burning Down the House? Or Flooding the Market? – CoStar Group
Federal Government Intervention in Bond Markets Making CMBS Jittery
By Mark Heschmeyer. September 3, 2013.
Whether they’re buying or selling, federal government entities are keeping bond investors on pins and needles as the summer wanes. First bond investors fretted after talks heated up this summer about the Federal Reserve eventually tapering down its purchase of government bonds – a program referred to as QE3 and widely acknowledged as playing a substantial role in helping re-stimulate commercial mortgage-backed bond issuances this year.
Also causing caution on the part of some investors has been the substantial increase in bond-selling efforts by Fannie Mae and Freddie Mac this summer – a potential worry for CMBS bond pricing.
Read the source article … https://www.costar.com/News/Article/Burn ing-Down-the-House-Or-Flooding-the-Marke t-/151783