Category: Emerging Markets

An Emerging Markets Status Update

1. Turkey has formed an interim government, but the AKP is slipping in the polls.  2. The South Africa Reserve Bank (SARB) is debating FX intervention, but sending confused messages.  3. Korea steps up its rhetoric to contain market volatility and announces new stimulus measures.  4. Bank of Israel has renewed talk of unconventional measures.  5. Ukraine and its creditors have reached an agreement on debt restructuring.  6. The source of tension in Brazilian politics is shifting.  7. There were several new measures out of China this week.  8.

A Preview of the Emerging Markets

It is a bitter start of the week for EM. It is hard to imagine either stabilization or meaningful differentiation in EM until asset prices in major markets find a bottom. In addition, the second leg down in commodity prices will keep fundamental pressure elevated for the exporters. Russia, Malaysia, Mexico, South Africa, and Brazil will be the barometers for this. Some have noted the break above the USD/CNY 6.40 level as meaningful, but we do not read too much into it. The Chinese yuan is doing what officials said it would do: there is more volatility but no large moves.

An Emerging Markets Status Update

1) The PBOC signalled more stability in the yuan, and that is what we have, 2) The official survey by the Brazilian central bank is now showing an average forecast for 2016 GDP in negative territory for the first time, 3) There are several takeaways from mass anti-government protests in Brazil last Sunday, 4) The Turkish central bank kept all rates unchanged yesterday, but released a road map to simplify is monetary policy framework, 5) Vietnam’s central bank decided to devalue the currency for the third time this year, while Kazakstan moved to a free floating regime , 6) Poland is st

A Preview of Emerging Market News and Events

With the all the euphoria about the Chinese currency depreciation apparently behind us, we can again focus on other drivers for EM assets. In addition, these are developments in G10, commodity prices and idiosyncratic factors. We do not expect any barriers for Greece to finalize its bailout, with the German parliament likely to endorse the agreement soon. Markets will continue to debate the timing for the Fed hike, with a September move likely the more negative outcome for EM.

An Emerging Markets Status Update

1) China has changed its FX regime, 2) No coalition likely for Turkey; elections in sight, 3) Moody’s downgraded Brazil one notch to Baa3, but did not assign a negative outlook, 4) Baxico sounded a bit more hawkish, at least cosmetically, 5) Markets have welcomed the cabinet reshuffle in Indonesia, 6) Vietnam widened its currency trading band after China’s devaluation, 7) China’s devaluation reduced the value of Argentina’s FX reserves

Emerging Economies Winter Olympic Hurdles

Recently, the International Olympic Committee (IOC) awarded the 2022 Winter Games to Beijing, in a joint bid with the city of Zhangjiakou, the capital’s “northern door” adjoining mountains with ski resorts.

In the West, the response has been apprehensive, presumably because of concerns about cost and environment.

“Plug-and-play” Olympics

A Preview of Emerging Market News and Events

EM is starting the week with a mixed tone.  EM currencies are on the weaker side but EM equities are generally firmer, especially in China as weaker data spur calls for more stimulus.  Stabilizing commodity prices are also helping sentiment, though it is far too early to call a bottom.  Firm US jobs data supports our call for September Fed liftoff, and US retail sales data on Thursday should support this notion too.  We remain bearish on EM assets for now.

An Emerging Markets Status Update

1) Poland’s lower house unexpectedly voted on a new legislation that would increase the burden of FX-linked mortgages losses to banks.  2) The popularity of the Chilean and Brazilian presidents continue to tumble.

The Fed Rate Hike and Emerging Markets’ Fastening Seatbelts

The fluctuations of the oil prices, the Fed’s policy rate and the U.S. dollar are intertwined. In fall 2015/spring 2016, the Fed’s impending rate hikes will cause substantial turbulence in emerging markets.

Until recently, oil prices were recovering. However, after rallying earlier in the year, oil plunged nearly 20 percent in July (and briefly fell below $47 per barrel). In the past, that has often heralded the coming of a bear market.

A Preview of Emerging Market News and Events

EM again starts the week on the back foot, but losses are (for now) concentrated in the commodity currencies.  With commodities (except for iron ore) already under pressure again, this trend looks set to continue.  US jobs data Friday is likely to bring the focus back on Fed liftoff, which is of course EM-negative.  MSCI EM has tried to get some traction, but the bounce was limited and it appears ready to test the cycle low from last week.