Many divergent paths, where are you today? Emerging market investment prospects re-examined


2022-06-24: [Chinese Article Link In the first half of 2022, capital inflows to emerging markets slowed significantly, and China’s most resilient market in the last two years was not spared. The macro-environment, such as geo-conflicting, rising raw-material prices, and tightening liquidity, deteriorated sharply, discouraging capital inflows to emerging markets. At the same time, however, stock markets and exchange rates in resource-exporting regions, such as Latin America and South-East Asia, have become more inverse. The pressure to slow capital inflows to emerging markets will continue in the second half of the year ahead. 1. Emerging markets experiencing capital outflows Cumulative net capital inflows to emerging markets were close to zero in January-May of this year, clearly weaker than in the same period in 2021, with net outflows in March-May. According to the International Finance Association (IIF), net capital inflows to emerging markets (non-resident investment portfolios) in January-February of this year amounted to only one-fifth of the same period in 2021. In the aftermath of the conflict in Russia-Ukraine in late February, there was a continuous net outflow of capital from emerging markets in March-May, bringing the cumulative net capital inflows in January-May closer to zero, compared with $153.8 billion in the same period in 2021. In terms of sub-equity, the stock market was hit more than the debt market: in January-May of this year, the emerging market stock market had accumulated a net outflow of $3.8 billion and the debt market had accumulated a net inflow of $3.9 billion. Figure 1 Significant slowdown in capital inflows to emerging markets, January-May 2022 As a result of capital outflows, emerging-market equities, bonds and foreign-exchange markets have been hit to varying degrees: on the stock market side, most emerging-market stock markets have fallen, although overall performance has been stronger than in the US, but regional segmentation has been evident, with regional equity markets such as Russia, Viet Nam, China and other regions falling sharply, while the “resource countries” such as Argentina, Indonesia and Brazil have seen negative stock markets rise. On the debt market side, interest rates in most emerging market countries rose less than those in the United States and Europe; in China and Turkey, for example, interest rates fell, as monetary policies eased. 2. The impact of monetary tightening in the United States and Europe After the Russian-Ukraine conflict, the risk of global inflation has increased, and central banks abroad have intensified. According to the World Bank, the global CPI grew by 7.8% in April 2022, the highest level since 2008. Among them, the inflation rate in developed economies was 6.9 per cent, the highest since 1982, far from its general inflation target of 2 per cent, forcing the central banks of developed economies, such as the United States and Europe, to adopt more radical austerity measures, with a sharper impact on emerging markets than in early 2021. First, the US-debt interest rate and the dollar index have been rising at the same time, with “dollars returning.” According to the US Department of the Treasury, the cumulative US international capital inflows in January-April this year amounted to $571.1 billion, 1.5 times the same level in 2021. By the end of 2021, the Federal Reserve had expected only 0.75 to 1 per cent of the increase in 2022, but as of June 2022, the Federal Reserve had increased its interest rate to 1.5 to 1.75 per cent, and the dotted figure suggested that it would increase the rate by about 3.5 per cent during the year. In addition to the expected sharp warming of the Fed, the post-conflict outlook for the United States economy in Russia-Ukraine is stronger than in Europe, further stimulating the dollar’s risk-avoidance attributes. Against this background, the combination of interest rates on US debt and the dollar index, which have soared since March, has led to a return of capital to the US: US interest rates have moved faster than most emerging markets, attracting hedge funds to the US; and the expected rise in dollar appreciation has further boosted the return on investment in US dollar assets. Second, the central banks of advanced economies are moving collectively toward austerity, with emerging-market pressures on a wider scale. As of 20 June this year, the central banks of New Zealand, Canada, the United Kingdom, and Australia had increased their rates by 0.75-1.25 percentage points, respectively, and the European Central Bank had announced at its June meeting that it would end its purchases in July and start raising interest rates for the first time in 11 years. Currently, markets are generally perceived as having “high-rate booms” or at least one to two years in advanced economies, and bond markets are continuously taking into account interest-added risks, as evidenced by the rapid rise in interest rates on short-end national debt in most developed economies. Third, the price of American and European assets has been sharply adjusted, and the decline in market risk preferences has been less conducive to capital inflows to emerging markets. In terms of global asset allocation, emerging-market assets typically have higher returns and higher risks associated with them, followed by a strong link between emerging-market levels of capital inflows and global risk preferences. Between late February and early March of this year, global markets have focused on war panics in the form of a rsk off state; up to now, since April, markets have focused more on related economic sanctions and inflationary pressures, and the associated risk of monetary tightening, triggering a new round of risk assets to be sold. During this period, the U.S. VIX index rose by 30 points, and U.S. corporate debt spreads to public debt, as well as high-yield and investment-level corporate debt, reflected a decline in risk preferences in overseas equity and debt markets, which were below their early 2021 levels. 3. Fragmentation of commodities in short supply After the conflict in Russia and Ukraine, raw materials dominated by energy and food were scarce, and the prices of related commodities rose sharply. Russian crude oil and condensed oil production accounted for 14 per cent of the world's total supply. According to the Russian Ministry of Economy, production of Russian petroleum and petroleum products will decline by 9.3 per cent in 2022 as a result of geo-conflicts and economic sanctions, with Ukraine producing 10 per cent and 15.3 per cent of global wheat and maize, respectively. The Food and Agriculture Organization of the United Nations (FAO), Puzzle Global and others have estimated that the conflict in Russia and Ukraine has resulted in the loss of nearly 50 per cent of wheat and maize production capacity in Ukraine. Emerging markets are affected by commodity shortages at three levels: first, trade between selected emerging market areas and Russia-Ukraine is blocked. With regard to agricultural products, regions such as Indonesia, Turkey and China have greater demand for wheat imported from Ukraine, and regions such as Mexico, Viet Nam and China have greater demand for maize imported from Ukraine. With regard to energy, most emerging market regions have limited demand for oil imports from Russia, with only some demand from China, Turkey, India and Brazil. Second, the rise in international commodity prices has increased the economic costs of the associated “demand countries”, but has increased the economic output of the “resource countries”, which has divided the performance of the “demand countries” of raw materials from that of the “resource countries” stock and exchange markets. Given that global wheat and maize supplies are more affected by the Russian-Ukraine conflict and higher prices, we observe stock indices and exchange rate performance in major emerging markets (and in some developed markets) using “total net exports of wheat and maize by 2020” as an indicator of the resource abundance of related agricultural products. As can be seen, the performance of most regional stock markets and exchange rates in January-May of this year was linked to the resource abundance of wheat and maize: Brazil achieved a “sink” in the first half of this year; China, Japan and the exchange rate were clearly under pressure; and stocks and exchange rate performance in Indonesia, Thailand, Malaysia, South Africa, etc. were at a medium-stream level. Figure 2 Stock market and exchange rate performance in most regions in January-May of this year is linked to the resource abundance of wheat and maize Third, the sharp rise in commodity prices has led to broader domestic inflationary pressures, which may further affect monetary policy, economic growth, and financial markets. According to the World Bank, as of April this year, more than 80% of EMDES inflation exceeded central bank inflation targets. As of May, 8 of the 13 emerging market areas that we have tracked have increased interest rates, with Argentina, Chile and Brazil having increased interest rates by 11, 4.25 and 3.5 percentage points, respectively. Most emerging markets' “defensive interest hikes” can, to some extent, resist capital flight pressures and contribute to exchange-rate resilience, and even the corresponding regional stock markets, such as Brazil, Argentina and others, can be expected to be positive if the increase is appropriate (the threat to economic growth remains manageable). It is worth mentioning that Turkey’s inflation rate was as high as 70% in April, but has not increased interest rates since this year, and its president called it a future or a reduction in interest rates in June. Monetary policy has allowed inflation to depreciate Turkey’s lira significantly, but the stock market has risen sharply, making it an undisguised surprise point. 4. The Chinese market is no longer “one horse ahead” According to IIF data, in 2020 and 2021, China's market net capital inflows continued to grow at the fastest rate in all emerging markets, or “one horse first”. As of the end of April of this year, net capital inflows to emerging markets had generally been weaker than in 2021, and China had only been at the middle level and had lost its “lead sheep” status. In March, in particular, the Chinese market experienced a financial outflow of $17.5 billion ($11.2 billion in bonds and $6.3 billion in equities), the first net outflow since September 2020, which was described by the IIF as an “unprecedented dynamic”. With regard to the stock market, since the end of May this year, the A stock has fallen by 17.2 per cent by 300 indexes, after Russia in the market we've been tracking. The observation of the ratio of the depth 300 index to the MSCI emerging market index showed that the A share was weaker in relation to the overall emerging market than in the period immediately following the outbreak of the Covid-19 epidemic in early 2020, which was the weakest level since the mid-American trade friction in 2018. On the debt market, the 10-year (real) spread between the US and China’s national debt had fallen, adding to the pressure of capital outflows. On the exchange rate, the renminbi’s exchange rate (to the United States dollar) remained strong until April, but since mid-April the depreciation has been strong, with the deepest depreciation close to 7%, and the offshore dollar’s exchange rate against the renminbi reached a high point of 6.83 on 12 May. The reason for this is that the Chinese market faces a triple challenge compared to other emerging markets: first, the downward pressure on the economy is greater, and the “scratch” of the internal and external economic and monetary cycles has been highlighted. The “triple pressures” on China's economy have persisted since this year, but most of the overseas economies are still in the recovery phase, creating a “sequence pattern” in which the domestic and external economic and monetary cycles are misaligned. The relative weakness of the Chinese economy and the relative easing of monetary policy are not conducive to attracting international capital inflows. Moreover, the unexpected increase in the impact of the Covid-19 epidemic since March of this year has further exacerbated this “diplomatic” and capital flight pressure. As at the end of May, the strict vaccination index for cattle Tianjin University showed that the control of the epidemic in China was stricter than in January, and that most of the emerging and advanced economies abroad experienced varying degrees of relaxation in terms of the strictness of the epidemic; and China’s Citibo Economic Accident Index has been rapidly shifting since May and is weaker than all emerging markets. Second, China's “demand country” is characterized by increased competition from the “resource country” or a “diffusion effect” on cross-border capital inflows to China, which is a large food-demanding and importing country. In particular, Russian-Ukraine post-conflict wheat and maize prices are under greater pressure, while Chinese demand for wheat and maize imports is high. According to FAO data, China's net imports of wheat and maize in 2020 totalled more than 25 million tons, ranking first among the 15 emerging and developed regions we tracked. With regard to energy, China’s demand for oil and other liquid fuels is second only to that of the United States. At the same time, some emerging-market countries in Latin America (e.g. Argentina, Brazil, etc.) and South-East Asia have become more favoured by international capital because of higher prices for raw materials, such as agricultural products, or have a “diversion effect” on China’s cross-border capital inflows. Third, the geopolitical risks associated with China and the pressure on the industrial chain to adjust. Since this year, Russia-Ukraine’s post-conflict geopolitical risks have risen globally, and the announcement by the US of the launching of the “IPEF” is a recent development. This means that international capital, when allocating assets in the renminbi, or by taking further account of the “security, stability, autonomy” of the industrial chain: First, given the close political ties between the economies of China and Russia, international capital is bound to worry about whether China's trade will be subject to the secondary “mistakes” associated with the sanctions imposed on the Russian economy. Second, with the official launch of the IPEF, economic and trade relations between the Indian and South-East Asian markets and the United States and Europe are expected to intensify, and China's “outside the industrial chain” doctrine is resounding. In particular, countries such as Viet Nam and Malaysia have joined several regional trade agreements, such as IPEF, RCEP (Regional Comprehensive Economic Partnership Agreement) and CPTPP (Comprehensive and Progressive Trans-Pacific Partnership Agreement). Investment prospects for emerging markets in the second half of the year We judge that the pressure to slow capital inflows to emerging markets will continue throughout the year and that, although this pressure may be smaller in the second or second half of the year, capital inflows throughout the year will be significantly weaker than in 2021. However, structural investment opportunities in emerging markets in the second half of the year, i.e., “resource countries” and areas benefiting from the restructuring of the industrial chain, will continue to benefit. The pace of capital allocation in China may fluctuate in the short term, but the outlook for the renminbi’s assets remains in the determined direction. First, the slowdown in emerging-market capital inflows will continue in the second half of the year, but may weaken marginally. Bloomberg data show that emerging-market capital inflows have remained above the 2019 average to date since 2021. In the second half of this year, the normalization of United States and European currencies, the tightening of global liquidity and the lowering of risk preferences, in the context of the lack of a substantial easing of global inflationary pressures, meant that the pace of international capital inflows to emerging markets needed to be reduced to at least pre-epidemiological levels. However, interest rates on US debt and the dollar index may have gone through the fastest upscaling phase (if US inflation falls and/or the economy weakens, US interest rates on US debt and the dollar index will be pressured) and most emerging markets are simultaneously moving forward with “defensive interest increases”, coupled with the fact that some emerging market asset prices have become more attractive after adjustment, and we expect emerging market capital inflows to perform better in the second half of the year than they will have been in the first half of the year. Figure 3 The future pace of international capital flows to emerging markets needs to be reduced to at least pre-epidemiological levels Second, because of the difficult pattern of raw materials shortages and the structural opportunities in emerging markets, “resource countries” in Latin America and South-East Asia and beneficiaries of the restructuring of the industrial chain are expected to perform well. The energy sanctions around Russia have made crude oil supply and stock levels “upgraded.” Crude oil supply strains in the second half of the year are unlikely to improve fundamentally, against the backdrop of the need to restore oil production capacity, OPEC resolution restraint, and “marginalized” production space. With regard to agricultural products, there is still room for fermentation of the effects of the Russian-Ukraine conflict on the supply of agricultural products: the effects of the war on regional food production, poor export routes for Ukrainian agricultural products, and the effects of changes in trade policies in various regions of the world can trigger pressure on agricultural products to increase prices. Finally, the pace of capital allocation in China may have fluctuated in the short term, but the improvement in the asset outlook for the renminbi remains a well-defined direction. During the second half of the year, China's economic cycle is expected to weaken to a degree that is “incorrected” from abroad: on the one hand, the tightening of overseas monetary policy during the first half of the year, while temporarily raising the relative attractiveness of overseas assets, has increased the downward pressure on the future overseas economy; on the other hand, the new wave of contagion in China in the first half of the year has temporarily exacerbated the downward pressure of the economy, the current situation is clearly reduced, the balance between epidemic control and economic development has become more delicate, the successive forces and effects of stable growth policies have become apparent, and the Chinese economy has moved out of the “to the dark” path of recovery. It can be said that this wave of turmoil in emerging markets is still unfolding, but China, as the second largest economy in the world, is looking forward to the promise of renminbi assets as long as the economy is able to move smoothly. The author was born as Chief Economist of the Peace Dealer, and Fan Qi as macroanalyst of the Peace Dealer.


Note: This is a machine translated version of the Chinese news media article. A mature and nuanced reading is suggested.



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Many divergent paths, where are you today? Emerging market investment prospects re-examined


2022-06-24: [Article Link In the first half of 2022, capital inflows to emerging markets slowed significantly, and China’s most resilient market in the last two years was not spared. The macro-environment, such as geo-conflicting, rising raw-material prices, and tightening liquidity, deteriorated sharply, discouraging capital inflows to emerging markets. At the same time, however, stock markets and exchange rates in resource-exporting regions, such as Latin America and South-East Asia, have become more inverse. The pressure to slow capital inflows to emerging markets will continue in the second half of the year ahead. 1. Emerging markets experiencing capital outflows Cumulative net capital inflows to emerging markets were close to zero in January-May of this year, clearly weaker than in the same period in 2021, with net outflows in March-May. According to the International Finance Association (IIF), net capital inflows to emerging markets (non-resident investment portfolios) in January-February of this year amounted to only one-fifth of the same period in 2021. In the aftermath of the conflict in Russia-Ukraine in late February, there was a continuous net outflow of capital from emerging markets in March-May, bringing the cumulative net capital inflows in January-May closer to zero, compared with $153.8 billion in the same period in 2021. In terms of sub-equity, the stock market was hit more than the debt market: in January-May of this year, the emerging market stock market had accumulated a net outflow of $3.8 billion and the debt market had accumulated a net inflow of $3.9 billion. Figure 1 Significant slowdown in capital inflows to emerging markets, January-May 2022 As a result of capital outflows, emerging-market equities, bonds and foreign-exchange markets have been hit to varying degrees: on the stock market side, most emerging-market stock markets have fallen, although overall performance has been stronger than in the US, but regional segmentation has been evident, with regional equity markets such as Russia, Viet Nam, China and other regions falling sharply, while the “resource countries” such as Argentina, Indonesia and Brazil have seen negative stock markets rise. On the debt market side, interest rates in most emerging market countries rose less than those in the United States and Europe; in China and Turkey, for example, interest rates fell, as monetary policies eased. 2. The impact of monetary tightening in the United States and Europe After the Russian-Ukraine conflict, the risk of global inflation has increased, and central banks abroad have intensified. According to the World Bank, the global CPI grew by 7.8% in April 2022, the highest level since 2008. Among them, the inflation rate in developed economies was 6.9 per cent, the highest since 1982, far from its general inflation target of 2 per cent, forcing the central banks of developed economies, such as the United States and Europe, to adopt more radical austerity measures, with a sharper impact on emerging markets than in early 2021. First, the US-debt interest rate and the dollar index have been rising at the same time, with “dollars returning.” According to the US Department of the Treasury, the cumulative US international capital inflows in January-April this year amounted to $571.1 billion, 1.5 times the same level in 2021. By the end of 2021, the Federal Reserve had expected only 0.75 to 1 per cent of the increase in 2022, but as of June 2022, the Federal Reserve had increased its interest rate to 1.5 to 1.75 per cent, and the dotted figure suggested that it would increase the rate by about 3.5 per cent during the year. In addition to the expected sharp warming of the Fed, the post-conflict outlook for the United States economy in Russia-Ukraine is stronger than in Europe, further stimulating the dollar’s risk-avoidance attributes. Against this background, the combination of interest rates on US debt and the dollar index, which have soared since March, has led to a return of capital to the US: US interest rates have moved faster than most emerging markets, attracting hedge funds to the US; and the expected rise in dollar appreciation has further boosted the return on investment in US dollar assets. Second, the central banks of advanced economies are moving collectively toward austerity, with emerging-market pressures on a wider scale. As of 20 June this year, the central banks of New Zealand, Canada, the United Kingdom, and Australia had increased their rates by 0.75-1.25 percentage points, respectively, and the European Central Bank had announced at its June meeting that it would end its purchases in July and start raising interest rates for the first time in 11 years. Currently, markets are generally perceived as having “high-rate booms” or at least one to two years in advanced economies, and bond markets are continuously taking into account interest-added risks, as evidenced by the rapid rise in interest rates on short-end national debt in most developed economies. Third, the price of American and European assets has been sharply adjusted, and the decline in market risk preferences has been less conducive to capital inflows to emerging markets. In terms of global asset allocation, emerging-market assets typically have higher returns and higher risks associated with them, followed by a strong link between emerging-market levels of capital inflows and global risk preferences. Between late February and early March of this year, global markets have focused on war panics in the form of a rsk off state; up to now, since April, markets have focused more on related economic sanctions and inflationary pressures, and the associated risk of monetary tightening, triggering a new round of risk assets to be sold. During this period, the U.S. VIX index rose by 30 points, and U.S. corporate debt spreads to public debt, as well as high-yield and investment-level corporate debt, reflected a decline in risk preferences in overseas equity and debt markets, which were below their early 2021 levels. 3. Fragmentation of commodities in short supply After the conflict in Russia and Ukraine, raw materials dominated by energy and food were scarce, and the prices of related commodities rose sharply. Russian crude oil and condensed oil production accounted for 14 per cent of the world's total supply. According to the Russian Ministry of Economy, production of Russian petroleum and petroleum products will decline by 9.3 per cent in 2022 as a result of geo-conflicts and economic sanctions, with Ukraine producing 10 per cent and 15.3 per cent of global wheat and maize, respectively. The Food and Agriculture Organization of the United Nations (FAO), Puzzle Global and others have estimated that the conflict in Russia and Ukraine has resulted in the loss of nearly 50 per cent of wheat and maize production capacity in Ukraine. Emerging markets are affected by commodity shortages at three levels: first, trade between selected emerging market areas and Russia-Ukraine is blocked. With regard to agricultural products, regions such as Indonesia, Turkey and China have greater demand for wheat imported from Ukraine, and regions such as Mexico, Viet Nam and China have greater demand for maize imported from Ukraine. With regard to energy, most emerging market regions have limited demand for oil imports from Russia, with only some demand from China, Turkey, India and Brazil. Second, the rise in international commodity prices has increased the economic costs of the associated “demand countries”, but has increased the economic output of the “resource countries”, which has divided the performance of the “demand countries” of raw materials from that of the “resource countries” stock and exchange markets. Given that global wheat and maize supplies are more affected by the Russian-Ukraine conflict and higher prices, we observe stock indices and exchange rate performance in major emerging markets (and in some developed markets) using “total net exports of wheat and maize by 2020” as an indicator of the resource abundance of related agricultural products. As can be seen, the performance of most regional stock markets and exchange rates in January-May of this year was linked to the resource abundance of wheat and maize: Brazil achieved a “sink” in the first half of this year; China, Japan and the exchange rate were clearly under pressure; and stocks and exchange rate performance in Indonesia, Thailand, Malaysia, South Africa, etc. were at a medium-stream level. Figure 2 Stock market and exchange rate performance in most regions in January-May of this year is linked to the resource abundance of wheat and maize Third, the sharp rise in commodity prices has led to broader domestic inflationary pressures, which may further affect monetary policy, economic growth, and financial markets. According to the World Bank, as of April this year, more than 80% of EMDES inflation exceeded central bank inflation targets. As of May, 8 of the 13 emerging market areas that we have tracked have increased interest rates, with Argentina, Chile and Brazil having increased interest rates by 11, 4.25 and 3.5 percentage points, respectively. Most emerging markets' “defensive interest hikes” can, to some extent, resist capital flight pressures and contribute to exchange-rate resilience, and even the corresponding regional stock markets, such as Brazil, Argentina and others, can be expected to be positive if the increase is appropriate (the threat to economic growth remains manageable). It is worth mentioning that Turkey’s inflation rate was as high as 70% in April, but has not increased interest rates since this year, and its president called it a future or a reduction in interest rates in June. Monetary policy has allowed inflation to depreciate Turkey’s lira significantly, but the stock market has risen sharply, making it an undisguised surprise point. 4. The Chinese market is no longer “one horse ahead” According to IIF data, in 2020 and 2021, China's market net capital inflows continued to grow at the fastest rate in all emerging markets, or “one horse first”. As of the end of April of this year, net capital inflows to emerging markets had generally been weaker than in 2021, and China had only been at the middle level and had lost its “lead sheep” status. In March, in particular, the Chinese market experienced a financial outflow of $17.5 billion ($11.2 billion in bonds and $6.3 billion in equities), the first net outflow since September 2020, which was described by the IIF as an “unprecedented dynamic”. With regard to the stock market, since the end of May this year, the A stock has fallen by 17.2 per cent by 300 indexes, after Russia in the market we've been tracking. The observation of the ratio of the depth 300 index to the MSCI emerging market index showed that the A share was weaker in relation to the overall emerging market than in the period immediately following the outbreak of the Covid-19 epidemic in early 2020, which was the weakest level since the mid-American trade friction in 2018. On the debt market, the 10-year (real) spread between the US and China’s national debt had fallen, adding to the pressure of capital outflows. On the exchange rate, the renminbi’s exchange rate (to the United States dollar) remained strong until April, but since mid-April the depreciation has been strong, with the deepest depreciation close to 7%, and the offshore dollar’s exchange rate against the renminbi reached a high point of 6.83 on 12 May. The reason for this is that the Chinese market faces a triple challenge compared to other emerging markets: first, the downward pressure on the economy is greater, and the “scratch” of the internal and external economic and monetary cycles has been highlighted. The “triple pressures” on China's economy have persisted since this year, but most of the overseas economies are still in the recovery phase, creating a “sequence pattern” in which the domestic and external economic and monetary cycles are misaligned. The relative weakness of the Chinese economy and the relative easing of monetary policy are not conducive to attracting international capital inflows. Moreover, the unexpected increase in the impact of the Covid-19 epidemic since March of this year has further exacerbated this “diplomatic” and capital flight pressure. As at the end of May, the strict vaccination index for cattle Tianjin University showed that the control of the epidemic in China was stricter than in January, and that most of the emerging and advanced economies abroad experienced varying degrees of relaxation in terms of the strictness of the epidemic; and China’s Citibo Economic Accident Index has been rapidly shifting since May and is weaker than all emerging markets. Second, China's “demand country” is characterized by increased competition from the “resource country” or a “diffusion effect” on cross-border capital inflows to China, which is a large food-demanding and importing country. In particular, Russian-Ukraine post-conflict wheat and maize prices are under greater pressure, while Chinese demand for wheat and maize imports is high. According to FAO data, China's net imports of wheat and maize in 2020 totalled more than 25 million tons, ranking first among the 15 emerging and developed regions we tracked. With regard to energy, China’s demand for oil and other liquid fuels is second only to that of the United States. At the same time, some emerging-market countries in Latin America (e.g. Argentina, Brazil, etc.) and South-East Asia have become more favoured by international capital because of higher prices for raw materials, such as agricultural products, or have a “diversion effect” on China’s cross-border capital inflows. Third, the geopolitical risks associated with China and the pressure on the industrial chain to adjust. Since this year, Russia-Ukraine’s post-conflict geopolitical risks have risen globally, and the announcement by the US of the launching of the “IPEF” is a recent development. This means that international capital, when allocating assets in the renminbi, or by taking further account of the “security, stability, autonomy” of the industrial chain: First, given the close political ties between the economies of China and Russia, international capital is bound to worry about whether China's trade will be subject to the secondary “mistakes” associated with the sanctions imposed on the Russian economy. Second, with the official launch of the IPEF, economic and trade relations between the Indian and South-East Asian markets and the United States and Europe are expected to intensify, and China's “outside the industrial chain” doctrine is resounding. In particular, countries such as Viet Nam and Malaysia have joined several regional trade agreements, such as IPEF, RCEP (Regional Comprehensive Economic Partnership Agreement) and CPTPP (Comprehensive and Progressive Trans-Pacific Partnership Agreement). Investment prospects for emerging markets in the second half of the year We judge that the pressure to slow capital inflows to emerging markets will continue throughout the year and that, although this pressure may be smaller in the second or second half of the year, capital inflows throughout the year will be significantly weaker than in 2021. However, structural investment opportunities in emerging markets in the second half of the year, i.e., “resource countries” and areas benefiting from the restructuring of the industrial chain, will continue to benefit. The pace of capital allocation in China may fluctuate in the short term, but the outlook for the renminbi’s assets remains in the determined direction. First, the slowdown in emerging-market capital inflows will continue in the second half of the year, but may weaken marginally. Bloomberg data show that emerging-market capital inflows have remained above the 2019 average to date since 2021. In the second half of this year, the normalization of United States and European currencies, the tightening of global liquidity and the lowering of risk preferences, in the context of the lack of a substantial easing of global inflationary pressures, meant that the pace of international capital inflows to emerging markets needed to be reduced to at least pre-epidemiological levels. However, interest rates on US debt and the dollar index may have gone through the fastest upscaling phase (if US inflation falls and/or the economy weakens, US interest rates on US debt and the dollar index will be pressured) and most emerging markets are simultaneously moving forward with “defensive interest increases”, coupled with the fact that some emerging market asset prices have become more attractive after adjustment, and we expect emerging market capital inflows to perform better in the second half of the year than they will have been in the first half of the year. Figure 3 The future pace of international capital flows to emerging markets needs to be reduced to at least pre-epidemiological levels Second, because of the difficult pattern of raw materials shortages and the structural opportunities in emerging markets, “resource countries” in Latin America and South-East Asia and beneficiaries of the restructuring of the industrial chain are expected to perform well. The energy sanctions around Russia have made crude oil supply and stock levels “upgraded.” Crude oil supply strains in the second half of the year are unlikely to improve fundamentally, against the backdrop of the need to restore oil production capacity, OPEC resolution restraint, and “marginalized” production space. With regard to agricultural products, there is still room for fermentation of the effects of the Russian-Ukraine conflict on the supply of agricultural products: the effects of the war on regional food production, poor export routes for Ukrainian agricultural products, and the effects of changes in trade policies in various regions of the world can trigger pressure on agricultural products to increase prices. Finally, the pace of capital allocation in China may have fluctuated in the short term, but the improvement in the asset outlook for the renminbi remains a well-defined direction. During the second half of the year, China's economic cycle is expected to weaken to a degree that is “incorrected” from abroad: on the one hand, the tightening of overseas monetary policy during the first half of the year, while temporarily raising the relative attractiveness of overseas assets, has increased the downward pressure on the future overseas economy; on the other hand, the new wave of contagion in China in the first half of the year has temporarily exacerbated the downward pressure of the economy, the current situation is clearly reduced, the balance between epidemic control and economic development has become more delicate, the successive forces and effects of stable growth policies have become apparent, and the Chinese economy has moved out of the “to the dark” path of recovery. It can be said that this wave of turmoil in emerging markets is still unfolding, but China, as the second largest economy in the world, is looking forward to the promise of renminbi assets as long as the economy is able to move smoothly. The author was born as Chief Economist of the Peace Dealer, and Fan Qi as macroanalyst of the Peace Dealer.

Note: This is a translated version of the Chinese news media article. A mature and nuanced reading is suggested.

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2022-08-07: 6 August 2022 Agricultural products (00061) - Cotton Overview of views: Supply: USDA significantly reduced production by 1 per cent in July for 22/23 years, mainly as a result of the drought in the United States, by 220,000 tons, and by 1.3 per cent for 22/23 years, with a general decline in…

World Weekly丨The domestic crisis is heavy, but the United States uses hegemony to cover it up

2022-08-08: The U.S. uses hegemony to cover it up. Original title: World Weekly: Domestic crisis, America using hegemony to cover it up. Recently, the economy of the United States emerged in the new quarter, with GDP falling by 0.9% per year in the second quarter, contracting again after 1.6% year-on-year…

Adhere to the expansion of opening up, adhere to the stabilization of foreign trade, and promote a strong economic recovery

2022-08-08: The latest figures issued by the General Customs Administration on 7 August indicate that import and export trade has accelerated further on the basis of rapid growth in the first half of the year, with total imports and exports increasing by 1.2 per cent, exports by 1.8 per cent and imports by…

Foreign Ministry Spokesperson Hua Chunying hosted a regular press conference on August 5, 2022

2022-08-07: (Original title: Routine press conference hosted by the spokesman for the Ministry of Foreign Affairs, Hua Chun Jian on 5 August 2022) At the invitation of the Minister for Foreign Affairs of Bangladesh, Momen, and the Minister for Foreign Affairs of Mongolia, Buttsetseg, the State Councillor…

Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference on August 5, 2022

2022-08-08: At the invitation of the Minister for Foreign Affairs of Bangladesh, Momen, and the Minister for Foreign Affairs of Mongolia, Buttsetseg, the State Councillor and Minister for Foreign Affairs of Wang Yi will visit the two countries from 6 to 8 August. At the invitation of the State Councillor…

More than 3,000 media around the world intensively forwarded! The voice of the head office continues to declare China's position-News Channel-Hexun.com

2022-08-07: In response to the visit of the Speaker of the United States Congress, Pelosi, to the Taiwan region of China, on 2 August, many people pointed out that the visit of Pelosi to the Taiwan region of China constituted a serious violation of China's sovereignty and territorial integrity and a serious…

More than 3,000 media around the world intensively forwarded! The voice of the main station continues to declare China's position

2022-08-07: In response to the visit of the Speaker of the United States Congress, Pelosi, to the Taiwan region of China, on 2 August, many people pointed out that the visit of Pelosi to the Taiwan region of China constituted a serious violation of China's sovereignty and territorial integrity and a serious…
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2022-08-08: The Regional Comprehensive Economic Partnership Agreement (RCEP) is unleashing the enormous potential of a large integrated market. On 7 August, the General Customs Administration released data showing that the country's total value of exports and imports grew by 10.4 per cent in the first seven…

Xie Fusheng, Kuang Xiaolu, Zhao Min: The theoretical creation of Marxist political economy in the 100-year history of the Communist Party of China

2022-08-08: Chinese Communist Party 100-year-old economic ideology Theoretical creation Marxist Political Economics Marxism is a source of theory for the Chinese Communist Party’s 100-year-old economic ideology. In the mid-19th century, when capitalism expanded worldwide and was associated with…

The climate of Xinjiang is much better than that of foreign countries, and the pattern of external strength and internal weakness continues.

2022-08-07: 6 August 2022 Agricultural products (00061) - Cotton Overview of views: Supply: USDA significantly reduced production by 1 per cent in July for 22/23 years, mainly as a result of the drought in the United States, by 220,000 tons, and by 1.3 per cent for 22/23 years, with a general decline in…

World Weekly丨The domestic crisis is heavy, but the United States uses hegemony to cover it up

2022-08-08: The U.S. uses hegemony to cover it up. Original title: World Weekly: Domestic crisis, America using hegemony to cover it up. Recently, the economy of the United States emerged in the new quarter, with GDP falling by 0.9% per year in the second quarter, contracting again after 1.6% year-on-year…

Adhere to the expansion of opening up, adhere to the stabilization of foreign trade, and promote a strong economic recovery

2022-08-08: The latest figures issued by the General Customs Administration on 7 August indicate that import and export trade has accelerated further on the basis of rapid growth in the first half of the year, with total imports and exports increasing by 1.2 per cent, exports by 1.8 per cent and imports by…

Foreign Ministry Spokesperson Hua Chunying hosted a regular press conference on August 5, 2022

2022-08-07: (Original title: Routine press conference hosted by the spokesman for the Ministry of Foreign Affairs, Hua Chun Jian on 5 August 2022) At the invitation of the Minister for Foreign Affairs of Bangladesh, Momen, and the Minister for Foreign Affairs of Mongolia, Buttsetseg, the State Councillor…

Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference on August 5, 2022

2022-08-08: At the invitation of the Minister for Foreign Affairs of Bangladesh, Momen, and the Minister for Foreign Affairs of Mongolia, Buttsetseg, the State Councillor and Minister for Foreign Affairs of Wang Yi will visit the two countries from 6 to 8 August. At the invitation of the State Councillor…

More than 3,000 media around the world intensively forwarded! The voice of the head office continues to declare China's position-News Channel-Hexun.com

2022-08-07: In response to the visit of the Speaker of the United States Congress, Pelosi, to the Taiwan region of China, on 2 August, many people pointed out that the visit of Pelosi to the Taiwan region of China constituted a serious violation of China's sovereignty and territorial integrity and a serious…

More than 3,000 media around the world intensively forwarded! The voice of the main station continues to declare China's position

2022-08-07: In response to the visit of the Speaker of the United States Congress, Pelosi, to the Taiwan region of China, on 2 August, many people pointed out that the visit of Pelosi to the Taiwan region of China constituted a serious violation of China's sovereignty and territorial integrity and a serious…