The stock market and economy move in sync over the medium-long term. That’s why it’s extremely important to understand the state of a nation’s/region’s economy. Is the economic data improving or deteriorating?
Let’s take a look at emerging market economic data as of January 2018.
China is the main driver for emerging markets. Many of the BRICs and other emerging markets are exporters to China.
After rising in 2016, China’s Manufacturing PMI has been flat for most of 2017.
Like the manufacturing PMI, China’s Non-manufacturing PMI has been flat for most of 2017 after rising in 2016.
New Orders in China are slowly trending higher.
Leading Economic Index
China’s Leading Economic Index continues to surge. This indicator is extremely useful for China watchers.
Chinese Consumer Confidence continues to soar as China’s economy transitions from manufacturing to services/consumption.
China’s old economy – manufacturing – has plateaued and most likely will not experience a surge in growth over the next few years. China’s new economy – consumption & services – continues to grow at a very healthy rate. This is a long term bullish factor for the Chinese stock market. Here’s SSE (Shanghai stock index).
Brazil is one of the BRIC’s.
Unemployment has only started to go down recently after surging in 2016.
Inflation has only started to increase recently after plunging in 2016.
Producer Price growth has only started to pick up recently after plunging in 2016. This is just like inflation.
Business Confidence continues to trend higher.
Industrial Production in Brazil continues to trend higher.
Consumer Confidence in Brazil continues to trend lower.
YoY % change in Retail Sales continues to trend higher.
Brazil’s economic data is mixed because the Brazilian economy is still climbing out of its worst recession in history. In other words, Brazil’s economic expansion still has a lot of room to go. This is a long term bullish factor for the Brazilian stock market. Here’s Bovespa (Brazil stock index).
Russia’s economy is heavily dependent on commodity exports (oil, natural gas, etc).
The Russian unemployment rate has been trending down over the past 2 years.
GDP growth rate
Russian GDP growth continues to pick up.
Russian inflation continues to trend lower. This is normal. Inflation skyrocketed in 2015/2016 thanks to Putin’s fallout with the E.U. and U.S.
Russian Industrial Production is deteriorating.
Russian Consumer Confidence is trending higher.
Like Consumer Confidence, Russian Retail Sales growth is improving.
Russia’s economy is dependent on energy exports. The Russian economy is improving because oil prices are up year-over-year. With oil prices in a long term bull market, the Russian economy should improve over the next few years. This is a long term bullish factor for the Russian stock market. Here’s MOEX (Russian stock index).
India is very different from other emerging markets. India isn’t as influenced by China’s economy as e.g. Russia, Brazil, Southeast Asia, etc.
More importantly, India’s economic data is not very good:
- There’s not a lot of historical data
- There’s a lot of statistical noise in the available data.
Indian inflation has been trending higher over the past few months.
Producer Prices YoY % change
Producer Price growth has been flat throughout most of 2017.
Indian Business Confidence is surging.
Here’s India’s NSE Nifty 50 (stock index).