The growth of stock markets in Latin America

The Latin Business Chronicle published a story today which technically, was supposed to focus on the growth of Colombia’s stock exchange and explain why it was the regions best performer last year.

In addition to Colombia, the article also shares data complied by Economatica on the growth of the other major stock exchanges in the region, which is what CSA will be sharing with you today.  To read the full article from the Latin Business Chronicle click here.

Colombia – Best performer in Latam last year, IGBC (Colombia’s benchmark) stock index has grown in value by 927.9% during the past 10 years, and average decline in value of transactions in 2008 was 2.3%—lower than all other countries in the region

Brazil – Latin America’s largest stock market, Ibovespa (Brazil’s benchmark) stock index has grown 301.3% during the past 10 years, and the average decline of transitions in 2008 compared with 2009 was 13.6%.

Mexico – IPC (major benchmark index in Mexico) has grown 250.5% during the past 10 years, and the average decline in transactions last year was 13.9%

Venezuela – The Caracas stock index has grown by 916.5% during the past 10 years, and the average decline in transactions was 29.5% last year—the second worst in Latin America.

Argentina – The Merval inces has grown by 321.3% during the past ten years, and had the worst average decline in transactions last year, suffering a decline of 54.4%.

Peru – The Lima stock index (IGBVL) has been one of the regions best performing in the past few years.  Seeing growth of 671.1% during the past 10 years, and a decline in average transactions last year of 21%.

Chile – Last but not least, Chile’s IPSA index has grown by 218.8% over the past 10 years, and the average decline in transactions last year was a mere 3.6%-second best next to Colombia.

A valuable bridge between Latin America and China

[Source] - Andean Development Corporation

• The CAF President, accompanied by an official delegation, visited the Asian country to deepen trade and investment links between Latin America and China.

• The Corporation is playing its characteristic catalytic role attracting funds from other latitudes for the progress of the region.

CAF President & CEO Enrique Garcia visited Peking, accompanied by a delegation from the Corporation, with the objective of deepening trade and investment ties between Latin America and China.

The working agenda included CAF participation in the Latin America-China Investors Forum (LA-CIF), organized by Latin Finance Magazine, along with a series of meetings with China Development Bank (CDB), EximChina, China Construction Bank, Industrial and Commercial Bank of China (ICBC), and Sinocapital, among others.

Promoting investment and trade between the two regions

At the LA-CIF Forum, CAF President Garcia, along with the president of HSBC China, Richard Yorke, and the deputy governor of the China Development Bank, Jian Gao, was one of the keynote speakers at the inaugural session which was attended by a large number of business leaders, bankers, investors, government representatives, academics and media.

During his remarks, Garcia spoke of the important role that China is playing in the current international economic and financial situation and its contributions to mitigating the effects of the global crisis. He emphasized the complementarity of the economies of the two regions and the positive impact which China’s accelerated growth has had on Latin American investments and exports.

He underlined the enormous potential of bi-regional relations and CAF’s interest in deepening them with a view to building a valuable bridge between Latin America and China. “The Corporation is committed to supporting Latin American countries in opening of new horizons in Asia and strengthening a long-term integrated development agenda. Its catalytic role will help attract new actors to channel additional resources, both economic and technological, in order to achieve sustained development and move toward stronger economies stimulated by competitive advantages.”

China Development Bank: a strategically

One of the most important high-level meetings held by the mission was with the China Development Bank Corporation (CDB), represented by its Governor Chen Yuan.

The two institutions, based on the excellent level of relations and successful joint work which has led to increased knowledge of China and of Latin America, agreed to sign a new cooperation agreement in the near future. The accord will define new lines of credit; move forward with cofinancing operations to benefit small, medium-sized and large enterprises; set up a trust fund; and promote exchange of personnel.

“Through CAF we have come to know more about Latin America,” Governor Yuan said. “We recognize the potential which the region represents and we have worked hard to make this into real cooperation. CAF is the best partner for us.”

Garcia said bilateral relations began in 2006, following identification of a series of common interests. He expressed his satisfaction that CAF had contributed to the important work which CDB is doing in Latin America, and the joint financing of projects in the region. “Our activities during this visit to China – the CAF president concluded – mean we are playing a catalytic role by contributing ideas and resources from other regions in favor of regional development.”

New steps in expanding relations with China Eximbank

As part of its strategy of deepening relations with Asia, the CAF mission also met with the Export-Import Bank of China (China Eximbank) which has become an important source of financing for capital goods, technology and infrastructure projects around the world.

At the meeting, the two institutions reaffirmed their interest in working jointly in areas of common interest. They agreed to sign a framework cooperation agreement in the near future which will cover lines of credit and joint operations with a view to actively promoting trade and investment initiatives in the framework of horizontal cooperation between developing countries.

South American Stock Markets; weekly roundup

EPU (Peru’s ETF) now trading on Mexico’s stock exchange

Atención a todos los inversionistas mexicanos. ETF del Perú, ahora se cotiza en la Bolsa Mexicana de Valores!

Now lets compare the two ETF’s.

Mexico – EPU.mx (Bolsa)

EPU.mx - Mexican Stock Exchange

United States – EPU (NYSE)

EPU - New York Stock Exchange

The quest for energy resources — CNN Video

CNN Video — Militants agree to stop attacks. Nigeria’s oil minister tells CNN China and U.S. are vying for their oil.

Newswire: Latin America

Argentina’s trade surplus contracts 42.8% during September – MercoPress
Argentina’s September trade surplus narrowed 42.8% from the same month a year ago, with exports falling even faster than imports, the government said this week. September’s 926 million US dollars surplus, which fell short of analysts’ expectations, is the smallest since January.

Brazil Soybean Growers Speed Up Planting on Rains, Safras Says – Bloomberg
Soybean growers in Brazil, the world’s second- largest producer, are speeding up planting of the oilseed as above-average rains improve soil conditions, Safras & Mercados analyst Flavio Franca Jr. said.

Soybean planting was 17 percent complete as of Oct. 16, compared with 8 percent a year earlier and an average of 5 percent in the past five years, said Franca Jr., who is based in Porto Alegre, Brazil.

Brazil Bank Keeps Rate, Signals No Increase Imminent – Bloomberg
Oct. 22 (Bloomberg) — Brazil’s central bank kept its key interest rate at a record low last night and said its level was “consistent” with a non-inflationary recovery, signaling that no increase in borrowing costs is imminent.

The bank, in a statement accompanying the board’s unanimous decision to keep the benchmark rate at 8.75 percent, repeated word-for-word the communique issued Sept. 2 when it paused after five straight cuts this year.

Colombian drug lord gets 45 years – Reuters

Cocaine kingpin, Diego Montoya, the former head of Colombia’s Norte del Valle cartel is sentenced in a Miami court to 45 years in prison.

Pemex May Renegotiate Oil-Service Accords, Minister Kessel Says – Bloomberg
Oct. 22 (Bloomberg) — Petroleos Mexicanos, Latin America’s largest oil producer, may seek to renegotiate oilfield-service contracts with companies such as Halliburton Co., Schlumberger Ltd. and Weatherford International Ltd. to try and boost output.

New laws allow state-owned Pemex, as the company is known, to offer performance-based contracts, Mexican Energy Minister Georgina Kessel said yesterday in an interview in Mexico City.

Peru’s BCP to Sell Benchmark Dollar Bonds in Overseas Markets – Bloomberg BCP, as the bank is known, hired Bank of America Corp. and JPMorgan Chase & Co. to arrange the bond sale, said the person, who declined to be identified because terms aren’t set. The company will begin marketing the offering Oct. 26. A benchmark issue is typically for at least $500 million.

Uruguay’s presidential election next Sunday too tight to call – MercoPress
Uruguay’s coming Sunday presidential election is proving to be more nerve-racking and difficult to forecast than anticipated, with the ruling coalition just a few inches away from repeating in spite of the falling performance of the main opposition candidate.

Commodity Boom Will Thrive on Shortages, Rogers Says

Newswire: Jim Rogers

“I don’t see any adequate-supply situation in any commodity market over the next decade or two,” Rogers, the chairman of Singapore-based Rogers Holdings, said today in an interview in New York. “The commodities boom is not over and the bull market has several years to go.”

“I own some cotton,” Rogers said. “I own some sugar,” he said. “Sugar will go much, much higher over the course of the bull market.”

“Oil could reach between $150 and $200 a barrel,” because known reserves of crude are declining, Rogers said. He said international relations, particularly between the U.S. and Iran, will help guide prices.

“Natural gas is very cheap,” he said in the interview between sessions at an ETF Securities Ltd. investor conference.

Commodities ‘Best Place’

“Commodities are the best place to be, if you ask me, based on supply and demand,” Rogers said. He said he hasn’t invested in equities outside of China in two years.

“Everything has gone through the roof,” Rogers said of equities prices, adding that he may consider buying stocks “if something collapses.”

Click here to read the complete Bloomberg article

Newswire: Commodities

China Nurtures Futures Markets in Bid to Sway Commodity Prices - WSJ

ZHENGZHOU, China — Chinese leaders are concerned that their nation’s enormous economic expansion is becoming an excuse for foreign suppliers to inflate commodity costs. So, they hope to use their three futures exchanges to fight back.

“It is true we have a long-term goal of increasing our influence in terms of pricing, but to do that we have to create conditions and do it step by step,” Jiang Yang, chief futures-industry policy maker and assistant chairman of the China Securities Regulatory Commission, said in an interview. “But as the Westerners say: ‘Rome was not built in a day.’

But Beijing believes hosting big futures markets will enhance the country’s economic security by essentially advertising what the world’s biggest customer for some commodities considers a fair price. For the rest of the world, the exchanges could mean less guesswork about China’s buying habits, possibly reducing volatility in the global market.

Silver Lining: Jim Rogers Talks Up Commodities – Time Magazine

Jim Rogers’ daughters may not have been born with silver spoons in their mouths, but they’ve got them now. Not silver spoons, exactly, but silver bullion. “My little girls don’t own stocks — they own commodities,” he says, “and that’s why they’ll be able to take care of me in retirement.”

Rogers sees three big secular trends now, and he’s acting on all of them. First, America’s role as the dominant economic power is declining, so why own American stocks? (He doesn’t.) Second, China is emerging, and even though it may have crises from time to time, it is a good place to invest. (He does.) Third — and this is the biggie — emerging nations including China are greatly increasing the future demand for commodities such as oil. (He’s in with both feet.)

“Thirty years ago, 3 billion people were not even participating in the world economy, and now they are trying to live like we do,” he notes. That emerging megaforce, says Rogers, will put a supertight squeeze on commodity prices across the board, from beef to bullion.

Oil Climbs Above $73, Nat. Gas Rallies as Equities Fly High – Rigzone

Jumping toward $74 a barrel on an American holiday, crude oil rallied more than $1 from last week’s closing price, bolstered by a weaker dollar and a rise in the equities market. Also gaining today, natural gas closed 12 cents below $5 as the energy commodity continues to strengthen despite bearish fundamentals.

After rallying to an intra-day high of $73.84, the price of crude oil settled slightly lower to $73.27 on the NYMEX Monday, a gain of $1.50 from Friday’s close. Additionally, the US dollar eased against a basket of foreign currencies, helping to spur a rally in today’s commodity prices.

China Iron Ore Imports Exceed Real Demand, CISA Says – Bloomberg via Chinamining.org

Iron ore imports by China, the world’s largest buyer, have exceeded real demand by 50 million metric tons this year, the country’s steel association said.

China’s iron ore imports surged to a record this year, hurting the group’s bid to negotiate a contract price cut bigger than the 33 percent offered by Rio Tinto Group and BHP Billiton Ltd. The nation is looking at cutting the number of licensed importers, industry minister Li Yizhong reiterated today.

China and rare earth metals

The Economist has just published a new article about China’s abundant and ever more precious rare earth metals. This adds to a flurry or articles, which have recently made it into major English language publications here in the US and Canada—including the Wall Street Journal, Market Watch and the Canadian Business Week.

The value of global rare-earth trade last year was just $1.25 billion, and it is projected to grow to about $3 billion by 2015—not much by most accords. However, the metals in question are absolutely essential for many high tech industries because of their phosphorescent and magnetic properties.

Rare earth metals include terbium, dysprosium, yttrium, thulium, lutetium, neodymium, europium, cerium, and lanthanum. These metals, as described by The Columbia Encyclopedia usually occur together in minerals as their oxides ( rare earths ) and are somewhat difficult to separate because of their chemical similarity.

The state-controlled Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Company dominates production of “rare earth metals” in China. Alistair Stephens of Arafura Resources in Australia, explains, “the Chinese realized the strategic importance of rare earths decades before the West.”

Producing the latest flat screen TV’s, smart phones, wine turbines, solar panels and even electric batteries which power America’s new Chevy Volt (battery powered car), are all simply not possible without these rare earth metals.

I am not one to doubt the incredible potential of the free market system, but in this particular situation, Deng Xiaoping was wise not to trust in the free market to dictate his “rare earth metals” policy in the 80’s.

As commodity prices fell in the mid 80’s, rare earth producers in the United States and Canada were priced out of the market. Deng Xiaoping, the man associated with introducing markets in China, instead encouraged the development of mines in the mid-1980s as prices fell dramatically.

Rare earth metals may not generate as much revenue as oil does for Saudi Arabia or Russia, but it is clear if China chokes off supply and begins consuming more of their rare earth metals domestically, the developed world will need to find new sources.

Additional articles on rare earth metals:

Will China Tighten ‘Rare Earth’ Grip? – The Wall Street Journal

Rare earths are vital; and China owns them all – Market Watch

Rare-earth metals: The new China syndrome – The Canadian Business Week

The rise of the Yuan

Yuan Inflows to Rise as Dollar Loses Luster, WisdomTree Says — Bloomberg

Sept. 15 (Bloomberg) — Investors are putting more money into the yuan
on bets China will allow appreciation in the exchange rate to make it
more accepted as an international currency, according to WisdomTree
Investments Inc.

A weak dollar, linked to concern about record amounts of debt in the
U.S., will drive more funds into China and emerging markets given
prospects growth rates will exceed those in developed countries, Bruce
Lavine, president of investment firm WisdomTree, said in an interview.

Lavine said in each of the last three months there was an inflow of
$25 million into his $142 million Chinese Yuan Exchange-Traded Fund,
which was started in May 2008 and invests mostly in yuan
non-deliverable forwards. ETFs are listed on an exchange where they
are bought and sold daily like stocks.

“Five years from now you will see a thoroughly different landscape in
terms of internationalization of the yuan,” said New York-based
Lavine, whose funds oversee $5.1 billion in assets. “When the dam
finally breaks, it happens faster than you think.”

To access the full article please visit –
http://www.bloomberg.com/apps/news?pid=20601110&sid=a7FkyJviwSqE

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