New emerging markets index points to developing world-led recovery

06/10/2009 | Phil Thornton

HSBC forecasts 6.0% EM growth in 2010

Emerging markets are likely to lead the global economic recovery, the chief executive of HSBC bank said yesterday as he unveiled a new index aimed at tracking the health of fast-growing developing countries.

Michael Geoghegan said that the 13 largest emerging economies had posted the strongest aggregate growth rate over the summer for more than a year. “Emerging markets continue to power growth in the global economy,” he said. “These economies have real dynamism and momentum today compared with some misfiring economies in the West.”

HSBC forecasts that emerging nations will post growth of 6.0% in 2010 compared with an anaemic 1.8% across advanced economies.

Geoghegan, who is CEO of HSBC Holdings plc, said last week that he would relocate from London in February to Hong Kong and become chairman of the Asia business – a move the bank said reaffirmed its commitment to the region.

At this morning’s launch of the HSBC Emerging Markets Index (EMI) on the fringes of the IMF’s annual meetings in Istanbul, the bank said it had compiled data from more than 5000 purchasing managers from 13 countries.

The economies it has picked are: the four BRIC economies – Brazil, Russia, India and China – plus the Czech Republic, Israel, Mexico, Poland, Singapore, South Africa, South Korea, Taiwan and Turkey.

The outperformance of the emerging market sector over the advanced economies has been a theme of the IMF meetings. In its keynote World Economic Outlook, the Fund forecast that the leading emerging and developing economies would grow by 5.1% in 2010, four times the 1.3% expected in industrialised economies.

The regional breakdown revealed that emerging Asian economies would grow by 7.3% next year, close to pre-crisis levels, while the US would post growth of 1.5% and the euro area just 0.3%.

Stephen King, HSBC’s chief economist, said: “Although the US remains the most important trading partner for many emerging nations, its relative importance is declining.”

The HSBC EMI, which is produced using data from the financial information company Markit, surged to 55.3 over the three months to September from 50.7 in the second quarter.

This marks a sharp rebound from the all-time low of 43.8 in the final quarter of last year in the wake of the collapse of Lehman Brothers. Any reading below 50 indicates that output contracted over the quarter.

Stephen Green, group chairman of HSBC Holdings, said the index captured a snapshot of the “economic heartbeat” of emerging markets. “As the world’s economic centre of gravity shifts from West to East, the economic strength of emerging markets will play an increasingly central role. In the development of financial markets,” he said.

Last week Mike Rees, head of wholesale banking at Standard Chartered, an investment bank that also has heavy operations in emerging markets, told Emerging Markets last week that the recovery in Asia and Africa would outpace that in the West. “The world is moving to a different place,” he said.

Related stories

  • HASAN TULUY: Now is not the time for LatAm to relax

    As the world economy moves to a ‘new normal’, Latin America must not sit back and relax but instead focus on boosting sustainable growth and eradicating inequality

  • Latin hopes grow for new China fiscal stimulus

    China’s plans to roll out a double-barrel fiscal and monetary stimulus package in the months ahead, in an attempt to stave off a marked slowdown in the world’s second largest economy, could offer a sliver of hope for Latin America’s struggling commodities exporters

  • COLOMBIA: Freeing up Colombia's economy

    In the enviable position of boasting low inflation as EM currencies tumble, Colombia appears well placed to withstand the shocks of changing global monetary policy. But for the economy to make sustainable strides, long-term improvements are needed – starting with infrastructure

  • Busan 2015: Korea trade key to venue choice

    The decision by the IDB to site its 2015 annual meetings in South Korea highlights the region’s desire to build on a fast growing trade and business relationship

  • Ecuador set to shake off spectre of default, aims for new ...

    Potential capital market reforms in Ecuador will open it up to new investment flows to the country


Editor's Picks


In Focus

  1. BRAZIL: Rousseff running out of time to restore economic credibility

  2. FINANCING LATAM’S BANKS: Niche currencies lead the way for LatAm exposure

  3. US QE tapering a good sign but watch the short end…

  4. JIM O'NEILL: Latin America can learn from Mexico’s efforts

  5. LATIN AMERICA: Filling the infrastructure financing gap