MORGAN STANLEY: Three Unexpected Developments Have Just Made Things Even Worse For Emerging Markets
In the last few days, three unwelcome political developments have further clouded the outlook for APxJ / EM equities:
--The Russian military incursion into Crimea in the aftermath of the Ukrainian revolution.
--The Kunming railway station knife attack, which left 33 people dead.
--A round of missile launches by North Korea both late last week and again today.
The Russian military incursion has been sucking up all the oxygen in the media.
And the North Korean missile launches (of which there were more this morning) are likely to be ignored.
The Kunming railway station attack likely deserves more attention.
Here's Garner:
For China, the Kunming railway station attack appears to present an escalation of an ongoing series of terrorism incidents most likely originating in separatist movements in Xinjiang province (according to Chinese state media quoted in the Wall Street Journal, March 3, 2014). It follows an earlier high profile incident in Tiananmen Square in October last year that killed five people. Bloomberg reported that the Xinhua news agency stated that 190 terrorist attacks took place in the region in 2012 increasing "by a significant margin from 2011". Other than the direct costs to the economy of enhanced security in public places, it will be important to monitor consumer activity as both recent attacks have targeted transportation / tourism destinations.
Investors around the world monitor every little tick of the Chinese economy, in part because so many countries depend on China for trade. A rising terrorism threat is not going to put anyone at ease.