Emerging Market View: What Our Analysts Are Reading

EM View

India’s newly elected Bharatiya Janata Party (BJP) government announced its first budget last week, and according to the Wall Street Journal, it proved a letdown for those expecting big-bang reform, MNCs included.

“While it is a well-balanced fiscal plan with focus on reviving consumption and investments, markets have not been overly pleased and experts find certain growth targets to be quite unrealistic. The absence of specifics on several big-ticket items and lack of an overarching vision should rightfully disappoint companies,” says Shishir Sinha, FSG’s Senior Analyst for Asia Pacific.

(Readers can view FSG’s original expectations for India’s BJP government here.)

Last week, Portugal’s Banco Espirito Santo SA bonds hit record lows after parent company Espirito Santo International reportedly missed a debt payment, rekindling market fears and reminding investors that the eurozone’s woes are far from over.

“Executives should be wary of headlines for recovery in WEUR, and prepared for the heavy downside that could accompany bank failure. Banco Espirito Santo, a Portuguese bank, delayed payments on some securities, reminding us that just because banks have not been in the news does not imply that they are healthy. FSG’s WEUR Regional Outlook outlines how banks could impact MNCs throughout the region,” says Lauren Goodwin, Senior analyst for Western Europe.

In Latin America, Argentine presidential hopefuls are dealing with the issue of debt negotiations and exploring opportunities for business-friendly reform, according to Reuters.

“As Argentina strives to negotiate with holdouts to avoid default, executives should consider the potential for improvement as elections approach in 2015. The current frontrunners favor negotiating with holdouts and would likely be more pragmatic and business-friendly than President Fernandez,” says Christine Herlihy, FSG’s Senior Analyst for Latin America.

In global news, Forbes recently released an article on local companies competing with foreign investors in emerging markets, citing a new study by Boston Consulting Group and echoing past FSG reports.

“Echoing the same message in FSG’s report Winning the Race For The Market Diamond, local competition gaining market share in emerging markets is an increasing concern for multinationals, particularly for MNCs that focus on the burgeoning emerging market middle class. Read the report to understand the strategies other companies have used to battle the evolution of growing domestic companies,” says Sam Osborn, Associate Practice Leader for FSG’s global analytics.

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