Global markets fell on continued panic stemming from the euro zone, as estimates of how much a Greek exit would cost have reached more than a billion dollars and concerns over Spain’s region of Catalonia came to the forefront of the conversation. Although Europe looks increasingly worrisome, other markets like Vietnam and Brazil may be picking up.
European markets fell on Friday after news that Catalonia could be in worse shape than expected. The president of the region, widely considered to be the engine of the Spanish economy (EWP, quote), called upon Madrid to spread more central government funds to regional political bodies. Compounding the issue was the news that Standard & Poor’s decided to cut the credit ratings for five Spanish banks. While it can sometimes be profitable to buy when there’s blood in the streets, investors should look for deals elsewhere and definitely not in the Spanish banking sector.
The Vietnamese central bank decided to cut rates in an attempt to spur growth on Friday. This week, numbers came in that GDP growth for the Southeast Asian country slowed to 4%. However, it was not all bad news; inflation came in much lower than expected, and its current account deficit narrowed. As a result, the Vietnamese central bank was able to cut rates without having too worry about too much inflationary pressure. Thanks to this macro environment, the Vietnamese economy (VNM, quote) could be poised to outperform some of its regional peers.
Brazilian equities (EWZ, quote) have been beaten heavily over the past few months as a result of the global risk-off trade, government intervention and slowing growth in the country. And while the short-term technicals are indeed still bearish for this Latin American giant, Rapoza thinks that the long-term fundamental story is still intact for Brazil. Analysts from both HSBC and Barclays see Brazil outperforming its BRIC counterparts in the future.
The state-run Indian oil company has finally decided to raise the price of petrol domestically as the low prices subsidized by New Delhi has long been unsustainable. However, because of popular backlash, the capricious Indian government has already started to roll back the price hikes. While an increase is favored by economists in order to improve India’s deficit, poorer citizens are adversely affected by higher oil prices. As long as the government prevents meaningful reform to its bloated subsidies program, the economy (EPI, quote) will continue to suffer.
Disclosure: Author’s immediate family is long both EWZ and EPI