This is going to be a busy week in India, China and Indonesia as we have local elections and key economic data, out of China, hitting the newswires.
The general elections in India kick off today. We have a parliamentary election in Indonesia on Wednesday and China will release trade data on Thursday and Inflation data on Friday. This comes as emerging markets (EM) start to regain favor with investors after a huge selloff last year triggered by the reduction in the U.S. quantitative easing program. In January, we saw $2.7 billion of capital investment into EM equities. This is the biggest surge since January of 2013.
The elections in India, the world’s largest democracy, needs a whole month to count the 814.5 million people who will vote. This number far exceeds the entire population of Europe. Investors are hoping that the business friendly Bharatiya Janata Party wins. The Indian benchmark, the Sensex is up almost six percent this year to date as investors hopes this becomes a reality. The party’s leader Narendra Modi has had a very favorable track record with direct investment and is fairly clean record in Gujarat. The question remains, will he be able to transform the local success to the national stage? His history shows that he will look for investment in heavy industry, infrastructure and power. This will be good for India.
India to also Release Economic Data this Week
India, on Friday, will release its industrial production for February. Output hit a four month high in January and we saw February’s manufacturing purchasing index or PMI grow at its fastest pace in over a year.
Things are also heating up in Indonesia as well. On Wednesday, the parliamentary elections will be closely watched. We have the presidential election in July. Last month, Jakarta’s popular governor Joko Widodo became the front runner in the main opposition group. The Indonesian Democratic Party of Struggle (PDI-P) also holds a lead in the polls for the presidential vote.
On Tuesday, the Bank of Indonesia will meet and we are expecting them to leave its key rate at 7.5 percent as the economy is showing signs of improvement. Last week we got data that showed a large trade surplus of $790 million. In January, there was a deficit of $440 million. A very encouraging development in the recently stagnating Indonesian economy.
Chinese Economic Data Watch
China will be releasing some very key data at the end of this week. Thursday we will get consumer price index (CPI), a key economic indicator of inflation. Last week we got ome mixed readings from February’s manufacturing data and this followed fears of corporate debt defaults. This served to heighten concerns over China’s credit and liquidity. With this said, we are expecting the trade data for March to recover after collapsing in February. Still, we expect soft import numbers. The CPI is expected to show a decrease in March but an annual increase to 2.4 percent.
Last Wednesday, Beijing announced another round of fiscal stimulus. This reduced the possibility of a monetary surplus, but soft data going forward could trigger Beijing to adopt a more accommodative, or looser, monetary policy.
Binary Options Take for the Day:
Today we will get some volatility in India’s equities indices as well as their currency. Emerging markets, like Indonesia will be in play as well this week. Look for volatility in their Forex markets as well as commodities like aluminum, copper, rubber and bananas.
Discussion:
What are your thoughts on China? Is the world’s largest economy slowing down and will Beijing adopt a more accommodative economic policy going forward. Sound off in comments below.