1. Chinese e-commerce: Recent data has confirmed that China is experiencing prolonged softer demand. This has resulted in rising competition. This is especially noticeable in China’s e-commerce firms, which have reported mixed earnings for the most recent quarter. Despite this, our China e-commerce research analyst is keeping a positive view on selected e-commerce companies. In his view, some of these companies are proactively taking steps to improve their bottom lines. In addition, any weakness in their latest results could have hidden the finer details of the strengths or strategies of these companies. For example, a company in our analyst’s area of coverage is looking to scale back in categories where there is stronger competition. He believes that this move, together with plans to improve monetization, may bring a positive impact to the company’s financials.

2. China property market rout accelerating: The value of new home sales among China’s top 100 developers declined 27% in July. This was partially attributed to the removal of new home price guidance in 10 Chinese cities. Previously developers needed approval from local government for the prices of new property launches. While the price decline is painful, property developers have already witnessed their market valuations fall significantly in expectation of this decline. We view the price adjustment as positive, as it creates a market clearing price for new homes and brings primary market pricing closer to secondary market trends. While this is not a catalyst for a recovery, we believe it is one step further on the path to rehabilitation of the Chinese real estate sector.

3. Mexican peso and credibility under pressure: The Mexican peso has depreciated 15% and the MSCI Mexico Index has underperformed MSCI Emerging Market index by 7% since the presidential elections at the start of June. The weakness is driven by concerns over judicial reforms proposed by the outgoing president and supported by president-elect Claudia Sheinbaum. The reforms centre on the direct election of judges, with candidates proposed by the government. This contrasts with the current practice of proposal by the president and ratification by the Senate. Implementation of the change requires supermajority approval by both houses of Congress and a majority of Mexico’s 31 states.

Templeton Emerging Markets Investment Trust (TEMIT)

TEMIT is the UK’s largest and oldest emerging markets investment trust seeking long-term capital appreciation.

‹ Previous2024-09-26Next ›