Share prices in China rose following the news of Joe Biden’s victory in the US Presidential election. Although President-elect Biden is expected to take a relatively robust approach when negotiating with China, his administration is likely to be less combative than that of his predecessor.
- The People’s Bank of China injected fresh liquidity into the financial system
- Inflationary pressures are building in Brazil
- India’s economy shrank by 7.5% between July and September
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Share prices in China rose following the news of Joe Biden’s victory in the US Presidential election. Although President-elect Biden is expected to take a relatively robust approach when negotiating with China, his administration is likely to be less combative than that of his predecessor. The Shanghai Composite Index rose by 5.2% during November.
“China is the only major emerging economy predicted to achieve positive growth in 2020”
The People’s Bank of China (PBoC) injected more liquidity into China’s financial system in a move designed to support the country’s economic recovery. China is the only major emerging economy predicted to achieve positive growth in 2020; the International Monetary Fund (IMF) expects China to expand by 1.9% this year and by 8.2% next year. In the longer term, growth in emerging economies is expected to decline to 4.7% by 2025 – well below the 5.6% average achieved between 2000 and 2019. This moderation is likely to be led by a structural slowdown in China following a strong cyclical rebound in 2021.
A survey undertaken by Brazil’s central bank suggested that inflationary pressures are expected to build, fuelling speculation that policymakers will move to tighten monetary policy over the next year. The central bank has an inflation target of 3.75% in 2021 and 3.5% in 2022. During October, Brazil’s rate of consumer price inflation rose at a monthly rate of 0.86%, hitting its highest October growth rate since 2002. Meanwhile, wholesale prices rose by 3.4% month on month during October, posting their strongest monthly increase since January 2014. On an annualised basis, they climbed by 19.1%. The Bovespa Index rose by 16.1% over November.
During November, credit ratings agency Fitch affirmed Brazil’s credit rating at “BB-“ with a “negative” outlook. Whilst acknowledging the country’s large and diverse economy, capacity to absorb external shocks, deep government debt market, and relatively high per-capita income, Fitch also cited Brazil’s “high and rising” government debt, its “rigid” fiscal structure and its lacklustre potential for economic growth, compounded by a “challenging” political backdrop that is likely to hinder reform.
Having contracted at an annualised rate of 23.9% between April and June, India’s economy recovered to shrink by a more moderate 7.5% during the three months to September. The IMF expects India’s economy to contract by 10.3% this year and then to expand by 8.8% next year. During November, the CNX Nifty Index rose by 11.4%.
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