Commentary

Fixing China’s Municipal Bond Market

The rapid growth of local government debt in China is a potential threat to the country’s financial stability. At the root of the debt problem is a severe fiscal imbalance that is driven by domestic politics.

Commentary

Field Notes: Hyderabad

The verdict remains out as to whether recent initiatives in India, such as the note ban and the Goods and Services Tax, will constitute significant steps forward in the country’s quest to become a modern and globally competitive industrial economy.

Commentary

Field Note: Singapore

A recent trip to Singapore revealed several companies as paragons of how to respond to a revenue and profit recession.

Commentary

On Value in the Emerging Markets

This paper seeks to understand if a value investing approach could be viable in emerging markets and identifies the specific drivers of value in these markets.

Commentary

Emerging Markets Briefing

Seafarer addresses key questions about emerging markets investing and how U.S. investors can integrate the asset class into long-term portfolios.

Commentary

On Starting Out

Judging from the headlines, it would seem an inauspicious time to start a company. The national rate of unemployment is high; the economy might have recovered from crisis, but growth is tepid, and confidence is low; myriad regulations and taxes supposedly stifle entrepreneurship; and our nation is deeply indebted. Many argue the country lacks the capacityand perhaps the willto invest properly in its own future. Whatever the case, it would not seem a particularly hospitable climate in which to launch a venture.
Commentary

On Mexicos Homes

Mexicos macroeconomic backdrop has been surprisingly benign for more than a decade now. The country has experienced stable growth, low unemployment, low levels of government debt and it has managed inflation relatively well, as evidenced in the table nearby. The country also enjoys very capable policy management, a burgeoning middle class, stable mortgage markets, strong housing demand and a wide field of homebuilders to cater to that demand. No one knows whether or when the violence in Mexico might end, but behind the headlines, the housing market gives hope that a stable future lies ahead.
Commentary

On the Sharia and Islamic Finance

The practice of banking according to Islamic principles, or the Sharia - the moral code and religious law of Islam - is relatively unknown within developed nations. However, in many parts of the developing world, Islamic banking is a burgeoning industry. It deserves closer scrutiny not only because it is bringing new and otherwise un-banked customers into the fold, but also because it serves as an alternative model for finance and it may manage certain types of risk better than conventional Western models.
Commentary

On Money and Confidence

At this moment, the worlds central banks have undertaken what appear to be coordinated efforts at relief, easing liquidity by boosting money supply. This is a welcome move, as liquidity has been strained. My concern is that while this monetary stimulus is necessary, it is not sufficient to achieve financial stability. Unless confidence is restored specifically, by repairing balance sheet solvency growth will remain tepid, and markets range-bound.
Commentary

On Mexicos Shores

Investors must exercise caution when approaching Mexico. The countrys fiscal position appears to be eroding, and this may induce greater dependence on inflows of foreign capital to cover the deficit; and this in turn may make the peso more volatile. However, with scant few safe havens left and as the flights to quality and liquidity continue across the financial markets, I am optimistic that industrial production in Mexico will be a bright spot in the emerging markets in the coming years.
Commentary

On Teflon and Emerging Market Currencies

Investors can distinguish between the fundamental health of EM credit which is, as some have suggested, strong and the still fragile currencies of those markets. Rapid unwinding of capital flows may do quick damage to local currency EM bonds, wiping out fixed income investors expectations for current income. EM credit denominated in U.S. dollars may be a viable alternative. EM currencies may offer desirable diversification, and they may even be a good investment but they remain speculative, and should not be considered a safe haven.
Commentary

On Flexibility, and Why the World Needs More of It

I hold no illusions about the gravity of the current sovereign crisis. The intractable nature of such large debts has sapped confidence. Most of Europe is saddled with unsustainable obligations, and a decade of fiscal profligacy has put the U.S. on a trajectory to match Europes worst. The West must put its fiscal house in order. All that stated, I want to be clear about what I view as our central problem today: the world is not growing fast enough. The challenge we face is, first and foremost, one of growth, and not necessarily one of debt.
Commentary

On Brazilian Investment

In my last commentary, I presented some basic evidence that suggested that Brazil?s long-term record of capital investment is not particularly impressive. Specifically, Brazil?s rate of ?fixed capital formation? was cumulatively 16.9% of GDP over the past two decades. This is the lowest rate among the vaunted ?BRIICS? emerging markets; it also falls below that of the U.S. at 18.2%. In my view, this figure is both surprising and disappointing. It?s surprising because a developing country such as Brazil should have great scope for productive investment.
Commentary

On The Importance of Sustained Capital Investment Part 2

This commentary revisits the topic. It presents basic evidence to support the idea that sustained capital investment is critical in the context of developing markets. The data presented below is gathered from several countries, so as to allow for comparison across emerging markets. Admittedly, the workings of macro economies are highly complex, and drawing detailed conclusions about them is tricky. Nonetheless, national statistics do reveal the general outline of an economy and its underpinnings. That?s how I intend to use the data here ? to make broad inferences only.
Commentary

On the Importance of Sustained Capital Investment, Part 1

I have placed greater emphasis on identifying companies that maintain steady investment programs. I prefer companies that are committed to the careful but consistent development of the markets in which they operate. My premise is that such companies are more likely to generate sustained, long-term growth.