Emerging-Market Growth Slows on Weaker Trade Demand, HSBC Says

Emerging-market economies probably grew more slowly in the third quarter as global demand weakened amid a slump in the euro region and the U.S., HSBC Plc (HSBA) said, citing a survey of purchasing managers.

The HSBC Emerging Markets Index, which is compiled by London-based Markit Economics and tracks conditions at more than 5,000 companies, fell to 52.1 from 53.2 in the previous three months, HSBC said in a report today. Expansion was weakest in a year and the second-slowest since the second quarter of 2009 when the global recovery began from the crisis that followed the collapse of Lehman Brothers Holdings Inc., HSBC said.

The International Monetary Fund cut its global growth forecasts yesterday and said that expansion may slow even more unless officials in the U.S. and Europe address threats to their economies. Among the largest emerging markets, Brazil and China underperformed India and Russia, HSBC said.

“The recovery in the developing world may take longer than expected, because the structural problems of the developed world are just weighing on,” Murat Ulgen, HSBC’s London-based chief economist for central and eastern Europe and sub-Saharan Africa, said by phone. “We are looking at a slight improvement in 2013. Gradually, things are expected to improve.”

The MSCI Emerging Markets Index (MXEF), which has advanced 8.77 percent this year, compared with a 14.9 percent gain for the S&P 500, fell 0.1 percent to 996.69 as of 1:30 p.m. in New York yesterday.

‘Good Springboard’

While monetary stimulus measures by major central banks will boost growth as “a good springboard,” they will take longer to have an effect than usual given “structural problems” in the developed world that weigh on trade and undermine consumer and business confidence, HSBC said.

Rate cuts that emerging-market central banks have undertaken will also fuel growth, said Ulgen.

“The main driver is monetary policy loosening both in the developing and the developed world -- but a lot of countries, like China are also doing targeted measures, too,” Ulgen said. “The global trade cycle is also expected to improve a bit going into 2013. But that is the biggest unknown because it has turned out to be much weaker than expected and we don’t see a major turnaround as yet.”

The world economy will grow 3.3 percent this year, the slowest pace since the 2009 recession, and 3.6 percent next year, the IMF said yesterday, adding that it now sees “alarmingly high” risks of a steeper slowdown, with a one-in- six chance of growth slipping below 2 percent.

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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