Beyond Synchronization
Monetary cycles in Emerging markets
Emerging Markets Equity Strategy
Adrian MowatAC
(852) 2800-8599
adrian.mowat@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Ben Laidler
(1-212) 622-5252
ben.m.laidler@jpmchase.com
J.P. Morgan Securities Inc.
Deanne Gordon
(27-21) 712-0875
deanne.gordon@jpmorgan.com
J.P. Morgan Equities Ltd.
Peter Westin
(7-495) 967-1771
peter.westin@jpmorgan.com
J.P. Morgan Bank International LLC
Rohan Ghalla
(91-22) 6719-8289
rohan.d.ghalla@jpmorgan.com
J.P. Morgan India Private Limited
Rajiv Batra
(91-22) 6695 3224
rajiv.j.batra@jpmorgan.com
J.P. Morgan India Private Limited
See page 43 for analyst certification and important disclosures, including non-US analyst disclosures.
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MSCI EM relative performance
20
40
60
80
100
120
140
96 98 00 02 04 06 08
v s USA
v s World
Source: Datastream
Overweight markets:
China, Mexico, Thailand and Philippines
Underweight markets:
Korea, Russia, Eastern Europe, Indonesia
• Synchronization rather than decoupling was the economic theme of
2008. The commodity inflation spike in early 2008 synchronized the
monetary policy response across emerging economies. The intended
lagged effects weakened EM economic momentum just as these
economies were forced into a recession by the severe demand shock
from developed economies.
• There are two key changes for Emerging markets; significantly weaker
economic growth and the resultant change in monetary and fiscal policy.
In this report, we describe the various monetary cycles in Developed
Asia and Emerging markets. As is the case with this type of analysis, the
time period and cycles can only provide a guide for emerging markets,
rather than generate a statistically significantly conclusion. Please see
our detailed notes on the monetary policy cycles for all the countries on
page 8.
• We use the historical evidence from the US and global sector
performance in monetary cycles as a guide to sector positioning in
Emerging markets (see Page 4). Our advice is to buy early cyclicals;
financials, domestic consumer discretionary and consumer tech.
• The question for 2009 is will emerging economies be LIFO (Last in First
Out) or LILO (Last in Last Out) in this global recession. We sit in the
LIFO camp; that is EM were the last into the recession and will be the
first out as the move to pro-growth monetary policy will work. A
rebound in Chinese economic momentum is critical to this view.

Table of Contents
Late to the Pro-growth Policy Party........................................3
Key Trades ................................................................................6
Emerging Markets' Monetary Cycles ......................................8
Brazil..........................................................................................8
China .......................................................................................12
India .........................................................................................14
Indonesia.................................................................................16
Korea .......................................................................................18
Malaysia ..................................................................................20
Mexico .....................................................................................21
Philippines ..............................................................................24
Russia......................................................................................26
South Africa ............................................................................28
Taiwan .....................................................................................30
Thailand...................................................................................32
Turkey......................................................................................34
Developed Asia Monetary Cycles .........................................36
Australia ..................................................................................36
Hong Kong ..............................................................................38
Singapore................................................................................40
J.P. Morgan Emerging Market Strategy Team .....................48