From booze to bulldozers, analysts scour for emerging market data
LONDON (Reuters) - From phone bills in Lagos to bulldozers in Beijing, analysts are looking creatively at ways to measure the strength of emerging market economies where official data sometimes comes up short.
How much Guinness are Nigerians drinking? How full are hotels in the Gulf? What about enrolment in international schools?
All are methods being used to track the ups and downs of economies where timeliness, transparency and accuracy do not always meet developed market standards.
The explosion of interest in emerging markets - Lipper data shows $90 billion in fund inflows last year - has drawn in many investors who are less familiar with analysing risky assets and need help.
Quarterly economic growth data, for example, is the most comprehensive and complete set of statistics on any developed economy's economic health.
Yet the availability of even this most-basic economic speedometer is fraught with caveats when it comes to emerging markets.
It is released too late to be of much use in the case of many African countries, or not at all in many Middle Eastern countries. In China, meanwhile, this key release arrives unsettlingly early for some.
So some analysts have started looking at other data or even creating their own datasets to assess how investible such markets are.
"In emerging markets it's more difficult (to get good data) than in developed markets, because it's expensive to run a good statistics office - it does not tend to be a priority," said Graham Stock, strategist at frontier fund Insparo, adding: "You have to use proxies."
BOOZE AND BULLDOZERS
Proxies that Stock and others look at to judge the strength of the growing consumer class in Africa - cited frequently by investors as one of the huge attractions of the continent - include quarterly consumption data from local breweries such as Guinness Nigeria (GUINNES.LG) and Zimbabwe's Delta (DLTA.ZI).
"We get more thorough data through going to the companies themselves - not as broad a coverage, but much more timely," Stock aid.
Investment in financial services stocks in Nigeria were boosted by an examination of mobile phone subscriptions.
The monthly data is released within a few weeks where quarterly gross domestic product data takes a few months.
It showed, for example, a 3 percent rise in active mobile phone subscriptions between September and November Nov 2012 to 110 million, in a country with a population of 170 million.
Based on that rise, which brings the December 2011-November 2012 gain in subscriptions to 16 percent, investors expect bank accounts - currently estimated at 20 million - to follow.
As a result, they have bought Nigerian banks, a good call in recent months. Zenith Bank (ZENITHB.LG) shares, for example, jumped 20 percent in the fourth quarter.
Analysts will have to wait several more weeks for the formal fourth quarter GDP data.
By contrast, analysts point to the speed with which China releases GDP - only a couple of weeks after the end of a quarter - as a sign it may not be accurate, encouraging them to look at other ways to replicate aspects of the data.
Mark Zandi, chief economist of Moody's Analytics, watches data from a firm which checks satellite monitors on Chinese construction equipment to see if the machinery is in use.
"That's been an area of concern, whether property markets are becoming overheated," Zandi said. "If they stop growing, that could be a problem for Chinese growth."
In the Gulf, investors may look at anything from hotel occupancy rates, to work visa approvals, to enrolment rates at international schools to assess the level of economic activity.
SURFING AND SUPERMARKETS
Not content with looking at these kinds of things, some investors have developed their own models or turned to those of academics in the search for data that more accurately measures economic trends.
State Street incorporated data on online shopping prices from U.S. company PriceStats into its own research in 2011, covering many developed markets as well as emerging markets such as Russia, South Africa, and Latin American countries.
The regularly updated data acts effectively as a leading indicator for official inflation data, according to a State Street study based on U.S. inflation.
In China, the surveys of food and supermarket prices show price deflation for most of December and January, in contrast to consensus expectations for inflation to quicken in China this year.
BlackRock, the world's largest fund manager, started its own sovereign risk indices in 2011 across major and emerging markets, amid concern about risk in many developed sovereigns.
"Our backtesting has shown that our index tends to highlight deteriorating fundamentals before the ratings agencies," said Thomas Christiansen, an investment strategist in the BlackRock Investment Institute.
- Tweet this
- Share this
- Digg this
- No Russia-Ukraine gas deal at EU talks; Moscow queries finances |
- UPDATE 1-Tennis-WTA Finals women's singles round robin white group results
- Sweden gets two new sightings, as hunt for undersea intruder goes on
- Singer Kesha denied drug, sex claims against producer three years ago
- U.S. to funnel travelers from Ebola-hit region through five airports