Hello Global Investors,
Today I’m gonna be releasing the first article of a series of weekly to bi-weekly roundups on news from Emerging Markets. I figured that many investors interested in economies like China and Latin America suffer from the lack of info, due to vehicles like The Times or WSJ only reporting the really big news from these regions.
Thinking about that, I'll start releasing this kind of small piece, updating all readers about the most recent - and important - news that might affect your international investments.
Most articles from this series will be free. However, If you want to have full access to The Global Investor content and to become a better investor internationally, consider subscribing for the paid version and testing it out:
Now let’s go
Legislative Decides Fiscal Issues in Brazil
A win for Bolsonaro’s government happened in the middle of the week when the House decided precatories will not be paid by the government on the scheduled date, meaning they’ll free up billions in budget to fulfill Bolsonaro’s wish to distribute more financial relief to the lower classes.
This move is being widely criticized for its populist character (especially since elections happen in less than a year). That said, the markets had a volatile week, with a small sigh of relief (uo 1.80%) since the expenses ceiling (the so-called golden rule) will not be - apparently - disrespected by the government.
There’s still a voting to happen in the senate this year (where Bolsonaro has less strength). So anyone interested in Brazil should pay attention to it.
BTG Increases Net Income by 80% and Beats Results, While Magalu Shocks The Market
Two of the biggest stocks in Brazil, BTG and Magalu, reported this week. While BTG posted beautiful numbers and great financials, Magalu was a disaster, with numbers like a 70% decrease in cash flow and only 12% revenue growth.
Magalu said those numbers were due to a worse result by the physical side of the business, relating the numbers to inflation and other macro reasons. On macro, BTG said its capture of wealthy clients are showing signs of slowing down next year, due to Brazil risk related to the elections.
MGLU fell 8% in the week and BTG fell 4%.
Argentina Polls Point to Government’s Defeat
After elections midterms defeat, Argentina will probably have a new leader in power after Alberto Fernandez disastrous last 2 years. That said, the liquidity crisis in place there will not be easy to solve for anyone that takes the chair as president. Argentina has asked for a bailout more than 20 times in the last 20 years, and it’s not looking pretty this time.
Single’s Day Numbers Gives Chinese Stocks the Spotlight, In Spite of Tencent’s Weak Report
Single’s Day reporting by JD and Alibaba made China bulls excited for the next quarters of the giants. Alibaba reported a GMV of US$ 84 billion, growing more than 15% from last year, while JD had a 30% surge in GMV.
Those numbers outshined Tencent’s not so pretty quarter, with revenue growth of about 15%. The interesting point on those Earnings was seeing the focus on gaming unchanged after the scrutiny and Tecent’s Pony Ma comments on how the Metaverse in China is still very far from completing its vision.
“The Meatverse will take longer than people realize”
Inflation Keeps Beating on EMs
Brazil had its highest inflation rate in October since 2002, while China had its worst inflation number in the last 20 years (1.27% and 3.5% respectively). Really ugly numbers that aren’t projected to get better anytime soon. China is still isolated from the outer world because of covid cases surging while Brazil’s fiscal problems are currently scarier than any horror movie.
Only time will tell how those regions will solve these questions but actions are required immediately. China at least posted some good industrial activity numbers, beating estimates while Japan failed to beat estimates again. That said, it is fair to say that both economies are in pivotal moments. China needs to prove it can keep growing and getting politically strong and Brazil has to get back on track to not end up like Argentina.
This is it for today’s edition, feedbacks are welcome!
See you soon!