2011’s Perfunctory Performance Pedestals
In Asia the Philippines exchange joined Indonesia in a late-year barely positive result among core MSCI stock markets down 20 percent. The spurt was attributed to regional reallocation from dominant destinations China and India, and its less correlated standing in the universe as well as steady remittance-aided GDP growth and revenue-driven fiscal strides. However these relative attractions began to wane in recent weeks with record flooding in the southern islands spurring government emergency spending on typhoon cleanup, as rebels long active in the area accused it of negligence. In the Gulf new overseas worker rules are designed to limit future professional labor influx, especially in the service and knowledge industries. While President Aquino faces no upcoming elections and retains solid approval ratings, a decision to prosecute his predecessor for alleged malfeasance in office has drawn fire in particular because former chief executive Arroyo is in ill health and has been denied medical treatment abroad. This pattern is familiar as she had charged her forerunner with embezzlement and he was subsequently found guilty and sentenced to prison. By contrast Indonesia’s President Yudhoyono has maintained political supremacy despite administration corruption incidents as the mainstream opposition remains weak and a landmark infrastructure law was finally passed, which will clarify land use and private participation for a wide range of electricity and transport projects. The package is pivotal to unlocking hundreds of billions of dollars in foreign commercial financing and investment needed by mid-decade, according to official estimates, that do not yet include launch of a much-debated Jakarta subway network. FDI at $20 billion is only half the level of the late 1990s pre-crash, while non-resident holding of local bonds was noticeably trimmed in the last 2011 quarter as central bank ownership jumped.
In fixed-income the EMBI+ chalked up a 9 percent return on the reverse trend with ten major components showing double-digit gains. The main loser was Argentina, which refused to budge as President Fernandez glided to another term, although her revelation of thyroid cancer has now focused attention on potential policy departures under Vice President and former Economy Minister Boudou, who handled reopened bond swap and Paris Club normalization negotiations. Another laggard was Ukraine, where the $15 billion IMF program has been postponed pending gas tariff and other changes, with external assistance needed in 2012 to cover debt repayment and the current account gap. Further Russian state bank lending may not be available with ongoing energy price disputes and street protests against Putin’s rule. Democracy monitors have decried similar tactics by Kiev with the jailing of opposition party head Tymoshenko for purported crimes, as the stock market too ended the year at the bottom of the frontier ranks in a form of exile.
