Emerging Markets

  • Studying African data requires thorough research and often a second look.

    Notoriously Inaccurate African Data Requires a Second Look

    In November 2010, Ghana Statistical Services announced new and revised gross domestic product (GDP) estimates. As a result, the estimated size of the economy was adjusted upward by more than 60%, suggesting that in previous GDP estimates economic activities worth about US$13 billion had been missed.

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  • The Turkish coup hit EM, but they may find traction this week.

    Emerging Markets Hit by Turkey, Recover, but Defensive Posture Warranted

    EM ended last week on a soft note, due in large part to the attempted coup in Turkey.  Weakness in the lira spilled over into wider EM weakness in thin Friday afternoon market conditions.  The situation in Turkey has calmed, and so EM may gain some limited traction this week.  However, that calm will likely be very fragile and so we retain a defensive posture concerning EM.

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  • Emerging markets tend to weaken in advance of an FOMC meeting.

    Emerging Markets now Between US Jobs Data and the FOMC Meeting

    EM and other risk assets rallied on Friday after the strong US jobs data.  It appears that markets are pricing in a benign backdrop for risk near-term; that is, the US economy is recovering but not by enough to warrant an imminent Fed rate hike.  The July 27 meeting seems unlikely, and so the next likely window would be September 21.  Yet EM typically weakens in the run-up to FOMC meetings and so investors should be very careful about taking on too much risk.

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  • South Africa faces a possible credit downgrade to 'junk' status.

    Can South Africa Avoid 'Junk Debt' Status?

    In early June, the international debt-rating agency Standard & Poor’s granted a stay of execution by not downgrading the South African government’s IOU certificate to a “junk debt” status.  This preserved the country’s credit worthiness as investment grade. South Africa should therefore be able to keep on sourcing external finance at a relatively affordable cost.

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  • Upset by the Brexit, emerging markets stage a comeback.

    Emerging Markets Stage Nice Recovery

    EM and risk recovered nicely from the Brexit turmoil last week.  Yet we think markets are being too carried away with the "low rates forever" theme and are likely underestimating the capability of the Fed to tighten before 2018.  This Friday, the June jobs data could spark a shift in sentiment with a strong reading.  Consensus is currently 175k jobs created, up from 38k in May.

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  • Africa will feel the effects of the EU referendum.

    How will the EU Referendum Result Hit Africa?

    Whatever its final impact, in the short-term the UK’s EU referendum will increase global economic uncertainty, market volatility and economic risk. In Africa, most scenarios will prove costly, particularly among those economies highly exposed to UK trade, investment, banking and remittances.

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  • Emerging Markets are still pondering the Brexit like everyone else.

    Indonesia, Czech Republic, and Brazil Lead the EM Headlines

    Indonesia’s parliament approved a tax amnesty bill, Korea announced KRW20 trln ($17 bln) in fiscal stimulus, Czech President Zeman said a referendum on EU and NATO membership should be held, Russia ended its tourism ban to Turkey, Brazil’s central bank is sending hawkish signals, Banxico hiked rates by a larger than expected 50 bp to 4.25%

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  • Brexit or no, South Africa will need trade deals with the UK.

    South Africa Needs the UK Market

    The UK has voted to leave the European Union (EU). South Africa has historical and very close trade ties with the UK. Most of these relations were inherited by the EU when South Africa signed a free-trade agreement with the bloc that came into effect in 2000. That agreement made both the UK and the EU jointly important trading partners.

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