20 juli 2011
Emerging countries seem to be on the verge of winning the war on inflation.

By our estimates, Chinese inflation should start to ease down this summer from the current 6.4% (without having the need for economic growth to collapse) bringing back into view an objective of a more tolerable price inflation target of around 4% per year. Recent comments from the Premier Wen Jiabao, were reassuring in this respect. Another encouraging sign – this time in India – is the end of fuel subsidies, reflecting the authorities’ confidence in the success of their anti-inflation program. Anticipated lower inflation will see investors’ attention return their focus now more on emerging countries’ strong growth, which, in any event, remains well above that of developed countries where monetary authorities’ flexibility has been reduced in the face of unresolved public debt problem and the need for deleveraging. To this end, the inevitability of government austerity plans suggests that the developed economies’ cyclical slowdown may last longer than the market is expecting. In contrast, in emerging markets, attractive valuations and solid fundamentals should be important catalysts for further recovery over the second half of the year. Indeed, in the last few weeks, the Indian and Chinese stock markets have responded positively to this optimistic view of their monetary policies becoming more accommodating in the future, by bouncing back strongly.