What we did learn from Friday’s silly close in the US is that hedge funds are positioned for more doom and gloom, thus we are either near a bottom (when everyone believes the market is going lower…) or someone is actually looking at the bond mkt this time for the appropriate signals on the health of the credit markets(where all of this started). Short interest remains huge everywhere but emerging markets not only have traded better than developed markets, the vol has come down appreciably. As I stated on the Fast Money on Friday, emerging markets are trading different because they are different. We got a slew of data from the key markets last week(BRICs) and with exception of Chinese inflation(…shouldn’t global slowing take some of the strain out of Chinese prices therefore this is good). GDP growth was revised up in Russia to 7.4%, exports were UP in China in January, the Real strengthened all the way to 1.70 last week on strong trade data and CB reserve build up(can you say upgrade?). The currency which reflects the growing fiscal reserves and robust trade balance, is chugging along towards the levels of when there was a fixed peg… …Now that we have spoken of hedge funds, the bigger question remains the sentiment of long-only funds and locals. This is where the next leg will come from.
EM news from today that is interesting to me:
Hungary abandon HUF floating band; HUF positive
India: Banking consolidation in India continues: HDB and Centurion have agreed in-principle to merge. HDFC Bank will be adding distribution and growing at a time when state is getting sector ready for foreign competition. State Bank last week raised 2.5Bn$ as government is looking to capitalize this bank and take on others in the sector.
Mexico: Antitrust agenda remains negative for large Mexican companies: TV, Telmex, Walmex; Ultimately this is good for ht economy and will augur higher growth potential like Brazil and Chile.
