The equity risk premium on US equities dipped below 2% this year, touching levels last seen just prior to the GFC. This is a result of a high 10-year bond yield and a relatively low earnings yield (inverted forward P/E for the S&P 500). We decided to look at the equity risk premium across Emerging Market equities.
The dust has not fully settled on the Silicon Valley Bank saga, and there is a lot of finger-pointing at management, sell-side analysts, and regulators. The swiftness of the collapse is what seems to be the most troubling. What takeaways are there for EM banks?
Taiwan went to the polls this weekend in local elections. President Tsai Ing-wen and her Democratic Progressive Party (DPP) made the election about a single issue, China. The DPP has long been a supporter of Taiwan’s independence from China and an antagonist to Beijing since Ms. Tsai took office in 2016.
As much as things change, things remain the same. And so, after being out of office for over a decade, and spending time in jail on corruption charges, Luiz Inacio Lula Da Silva will return as Brazil’s president. We would usually be concerned about the return of a leftist president, one that wants the government and SOEs to play a greater role in the economy.
Throughout the summer and leading up to the National Party Congress, there was growing speculation on how much power President Xi Jinping would lose. On the eve of the once in five-year event, China’s property sector was struggling, Xi’s signature Zero Covid policy was wreaking havoc on the economy, and his embrace of President Putin made China more isolated internationally than it had been in decades.
It is easy to get overwhelmed by the deluge of data on China property, from over-leveraged property companies to government restrictions on property purchases (‘Houses are for living in, not for speculation’, Xi Jinping). We believe two data points in particular help to explain why the China property market will not be the engine of growth that it once was.