Emerging-market telecom buyers get picky (MarketWatch): As international telecommunications operators shelve expansion plans to preserve cash and the myth collapses that emerging-market economies are independent from their western counterparts, the face of dealmaking in telecom is changing rapidly.

Emerging markets face capital squeeze, action needed: IIF (Reuters): Private capital flows to emerging markets are set to drop by nearly two thirds in 2009 as the global economy makes its most extreme downturn since World War Two, the Institute of International Finance said on Tuesday.

The IIF is an association of financial services firms with 400 members worldwide.

OPEC Calls for Curbing Speculators, Blames Hedge Funds for Rout (Bloomberg): OPEC wants U.S. regulators to curtail oil trading by hedge funds and speculators who helped make last year the most volatile in crude oil trading.
You can blame hedge funds for anything.

Emerging markets undervalued, analysts say, but ignore oil

Emerging Market Stocks to Outperform, Garner Says: Chart of Day (Bloomberg): Emerging-market stocks are a better buy than those of more developed regions because their economies will rebound more quickly from the global slowdown, according to Jonathan Garner, a strategist at Morgan Stanley.

Since October, emerging stocks have begun to close the gap on developed-market stocks, a trend that will continue next year, Garner says. But where? And how will the relationship with oil affect these stocks?

Looking Ahead: Emerging markets remain attractive (The Economic Times): Given the steep market decline, investors have begun to shift their focus to the increasingly attractive valuations in emerging markets. Many markets are trading at single-digit price-to-earnings ratios, with many companies trading at below their net asset value. Stock prices rebounded in December, as investors sought to benefit from the attractive investment opportunities in the asset class.

Dr. Joseph Mark Mobius and Garner both say the emerging markets are undervalued, but so is oil right now. These guys don’t even mention oil or other commodities for that matter. Obviously some countries aren’t relying on oil (China and India) and will benefit from the low prices. But do we need an equilibrium before stocks rebound?

EMERGING MARKETS-Bond advance narrows spreads, stocks sink(Reuters): Investors dipped deeper into their cash horde on Friday, buying selectively in emerging market sovereign bonds but stopped short when it came to stocks and currencies in thin pre-Christmas holiday trade.

Brazil Bank Estimates Cut at Goldman Sachs on Rates (Bloomberg): Brazilian banks had their 2009 and 2010 earnings forecasts cut by Goldman Sachs Group Inc., which said a drop in lending rates will lower profits while an economic slowdown curbs loan growth.

Oil’s Crash Stirs Unrest in Russia as Slump Hits Home (WSJ): Russia’s oil-fired economic miracle is unraveling as industry shrinks and job losses mount. Now the first stirrings of social unrest have the Kremlin groping for a response.

Exhibit A: The emphasis on oil here is clear. If oil prices remain depressed, then it is difficult to justify Garner’s  and Mobius’ thesis.

Emerging-market stock allocation lowest since 2001, survey (Dow Jones): Global fund managers slashed their allocation to emerging-markets equities in December to their lowest levels since 2001, according to Merrill Lynch’s latest fund-manager survey.

Emerging-market stocks reach six-week high on Fed rate cut, oil (Bloomberg): Emerging-market stocks rose to a six- week high on speculation that near-zero interest rates in the U.S. and rising commodity prices will boost economic growth in developing nations.

Amid recession, select assets attractive, says Barclays Capital (Marketwire): Barclays Capital, the investment banking division of Barclays Bank PLC, today said in its latest quarterly research publication, “Global Outlook: Positioning for an Uncertain Recovery,” that amid the most severe global recession in decades, the risk/reward trade-off has begun to look attractive in select areas, particularly for some credit assets.

Look Homeward (The Economist): The “wall of money” argument is a hardy investment perennial. Back in the 1980s, it was the Japanese who would sweep in and push up stock markets. In recent years, sovereign-wealth funds have assumed the role of sugar daddies, with cash readily available to support asset prices.

SWFs will obviously grow a little older and wiser as a result of the U.S. mortgage collapse. They are likely to invest in their own backyards from now on spelling trouble for U.S. companies desperate for foreign relief. Why invest in the Big Three when you can start your own car company for less?

Emerging Market week – Weak Commodity prices to hurt EM (Reuters): Emerging markets are likely to continue their downward spiral this week, pressured by a slump in commodity prices as demand wanes due to the intensifying U.S. recession.

This summer, U.S. stock indices were tightly correlated to oil prices. As oil futures rose, stocks fell. Now as oil prices have fallen, the the emerging market indices are retreating. The correlation goes both ways.

U.S. Sees China Intent On Yuan Gaining Value (Washington Post): Treasury Secretary Henry M. Paulson Jr. said Friday that China remains committed to market reforms and to allowing its currency, the yuan, to appreciate in value even though it fell steeply this week.

U.S. Treasury securities are the only major export to China. If the yuan appreciates then piddly return China is already getting will weaken even less.

Paulson sought to play down American concerns about China’s growing financial influence in the United States, particularly its position as the world’s top holder of Treasury bills. “It’s a fact that China is an investor in the U.S.,” the Treasury secretary said. “But as I look around the world, I don’t see any country with a stake so big that I consider it a threat.”

I don’t know if I understand this right, but how does China gain as its currency appreciates?