A Preview of this Week’s Events Among the Emerging Markets

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There were few notable developments out of the G20 meeting that would directly impact EM markets.  However, the escalating tensions with Russia made evident in the meeting have increased to the point that it could again lead to spillover effects. Separately, the political climate in Brazil is heating up again and starting to feel like a “3rd round” in the electoral dispute.  President Dilma is coming under huge pressure to appoint a finance minister, while the corruption scandal surrounding Petrobras deepens further.


There were few notable developments out of the G20 meeting that would directly impact EM markets.  However, the escalating tensions with Russia made evident in the meeting have increased to the point that it could again lead to spillover effects. Separately, the political climate in Brazil is heating up again and starting to feel like a “3rd round” in the electoral dispute.  President Dilma is coming under huge pressure to appoint a finance minister, while the corruption scandal surrounding Petrobras deepens further.

Chile reports Q3 GDP and current account Tuesday. Growth is seen slowing to 0.9% y/y from 1.9% in Q2. The central bank meets later that day and is expected to keep rates steady at 3.0%. Despite slowing growth, CPI rose 5.7% y/y in October and was the highest rate since January 2009.  This is well above their 2-4% target range and that should keep the bank on hold until inflation starts moving up toward that range.

South Africa reports October CPI Wednesday, expected to remain steady at 5.9% y/y.  The Reserve Bank meets Thursday and it is expected to keep rates steady at 5.75%. This will be the first meeting under new Governor Kganyago. Of the 22 analysts polled by Bloomberg, six are looking for a 25 bp hike to 6.0%. With inflation back in the 3-6% target range and growth still sluggish, we do not think the tightening cycle will continue so soon under Kganyago.

Brazil reports mid-November IPCA inflation Wednesday, expected to rise 6.57% y/y vs. 6.62% in mid-October. Price pressures at the wholesale and PPI level have been easing for several months now.  Hopefully, consumer prices will follow them lower. The recent hike in domestic fuel prices, which could keep inflation elevated near-term, complicates the situation a bit. The central bank is thus likely to hike rates by 25 bp again at the December meeting.

Banco de Mexico releases its quarterly inflation report on Wednesday. Mexico then reports September INEGI retail sales on Thursday. ANTAD sales were -2.1% y/y for September and so there is some downside risk to the INEGI reading. However, ANTAD sales rebounded and rose 2.1% y/y in October. Mexico then reports Q3 GDP on Friday, expected to rise 2.3% y/y vs. 1.6% in Q2.

HSBC reports flash China PMI for November on Thursday, expected at 50.2 vs. 50.4 in October. Weaker than expected China data last week weighed on market sentiment. New yuan loans came in at CNY548.3 bln vs. CNY626.4 bln consensus, while aggregate financing came in at CNY662.7 bln vs. CNY887.5 bln consensus. Money growth, IP, and retail sales were all slightly slower than expected. We still see more targeted stimulus out of China, but no rate cuts or other large-scale stimulus measures.

Taiwan reports October export orders and Q3 current account Thursday.  Orders, predicted to rise 10.3% y/y vs. 12.7% in September, have picked up. However, the weak yen is an issue, and could negatively impact exports and export orders in the coming months. Indeed, October exports rose a weaker than expected 0.7% y/y and that was the weakest undistorted rate since October 2013.

Central Bank of Turkey meets Thursday and it is expected to keep rates steady. A very small handful of analysts are looking for easing to resume, but we think it is too early still. CPI rose 9.0% y/y in October vs. 8.9% in September, well above the 3-7% target range. Elsewhere, vulnerabilities are easing a bit as the external accounts benefit from lower oil prices. The 12-month current account gap fell to -$46.7 bln in September, the lowest since December 2010.

Poland reports October IP Thursday, expected to rise 1.4% y/y vs. 4.2% in September. Later that day, the central bank also releases minutes from its last meeting. Poland’s GDP grew 3.3% y/y in Q3 and that may help justify the central bank’s decision to surprise markets with a pause in the easing cycle.  That said, CPI for October (a less-backward looking indicator than GDP) came in at -0.6% y/y, so we are not convinced there will be no more easing in Poland.

Malaysia reports October CPI Friday, expected to rise 3.0% y/y vs. 2.6% in September. The increase is due largely to a 10% rise in fuel prices that month, as the government reduced subsidies in an effort to narrow the budget gap. The economy is slowing, as Q3 GDP growth came in at 5.6% y/y vs. 6.5% in Q2. With consumption likely to slow because of increased fuel prices, we think the central bank will remain on hold for now. If has kept rates steady since the first and only 25 bp rate hike back in July.

Emerging Markets: Preview of the Week Ahead is republished with permission from Marc to Market

About Marc Chandler PRO INVESTOR

Head of Global Currency Strategy at Brown Brothers Harriman.