Category: Emerging Markets

An Emerging Markets Status Update

1) The Brazilian congress passed a new measure that will hurt the fiscal outlook, 2) Brazil central bank kept the inflation target for 2017 the same at 4.5%, but narrowed the tolerance band to +/ 1.5 percentage points, 3) Israel central bank has gotten less dovish, 4) Nigeria central bank banned importers from accessing the FX market for some goods, 5) US Treasury Secretary Lew said that China committed to limit FX intervention only to times of “disorderly market conditions.”, 6) China’s cabinet is moving to scrap a rule that limits lending by commercial banks to 75% of th

A Preview of the Emerging Markets

EM assets are starting the week off on a firmer footing.  Sentiment has been helped by optimism over a Greek compromise, as well as perceptions of a less hawkish Fed.  Both of these factors could turn negative very quickly.  Besides the global backdrop, idiosyncratic risks within EM argue for continued differentiation by investors.  We remain most optimistic on Asia as a region, while Latin America and EMEA remain most vulnerable in the current environment.

An Emerging Markets Status Update

1) The EU sanctions on Russia will be extended for another six months, 2) Lawmakers in Hong Kong voted down a Beijing-backed plan to change the political system, 3) Argentine presidential candidate Scioli of the ruling alliance has picked Zannini as his Vice Presidential candidate, 4) Malaysia‘s opposition alliance has collapsed, 5) Brazil’s corruption investigation is heating up again

A Preview of the Emerging Markets

In a familiar refrain, EM starts this week on a soft note.  Most EM currencies are softer against the dollar.  MSCI EM is having trouble gaining traction, and appears headed for the March lows.  EM bond yields are rising in tandem with DM bond yields even though we have only seen an increase in expectations for tightening in Brazil.

Strong Dollar Poses Economic Dilemma in Emerging Markets

When the dollar starts to gain ground, it comes as a double-edged sword for economies in the emerging markets. Generally a strong dollar means more expensive imports for the emerging markets especially from the US. On the other hand, this means that exports from the emerging markets become cheaper in the US and other countries which prefer making their payments in USD.

But as it is always in the dynamic economic environment, there are numerous factors that always come into play and complicate the whole smooth picture.

An Emerging Markets Status Update

1. Turkey looks to have a coalition government for the first time since 2002.  2. Brazil’s central bank is reducing its rollover of FX swaps.  3. Hungary recorded the first positive y/y CPI reading in 8 months.  4. MSCI deferred its decision on including China A-shares in its indices.  5. Mexican President Pena Nieto would not commit to reappointing central bank Governor Carstens.  6. Poland will see a cabinet reshuffle as three ministers and the parliamentary speaker resigned.  7.

A Preview of the Emerging Markets

EM has started the week on a weak footing.  The results of the Turkish elections knocked the lira down over 3% and the BIST down nearly 6%.  More broadly speaking, the uncertainty surrounding the Greek situation along with the risk of another leg higher for yields in Germany and the US will keep EM assets on the defensive.  On Wednesday, the Brazilian lower house votes on one of the elements of the fiscal adjustment, and any sign of backtracking there could hurt the government’s credibility.

An Emerging Markets Status Update

1) Political risk is rising in Colombia, 2) Petrobras issued debt for the first time in six months, 3) The Russian central bank suspended some FX auctions, stepping up measures to counter RUB strength, 4) Tensions between Ukraine and Russia are escalating again, 5) Hungary’s central bank has changed its policy tools, 6) China took another important step towards interest rate liberalization, 7) In a highly unusual development, the Thai government started to argue for less central bank easing

A Preview of Emerging Market News and Events

EM assets are starting the week off on a soft note, picking up where we left off last week.  The usual culprits can be cited:  firmer US dollar, softer commodity prices, global growth slowing, and Fed tightening concerns.  However, the recent EM pattern of weaker currencies and firmer equities has paused for now, with both selling off in recent sessions.  If MSCI EM closes down today (it is currently flat), it would be the 6th straight down day and 10 of the past 11.  Right now, it is testing the 200-day MA near 1000, and a break below 987 (62% of the March-April ri

An Emerging Markets Status Update

1) Brazil’s Senate finally approved the much discussed fiscal measure, 2) Poland’s ruling party lost control of the presidency, 3) The conflict in the South China Sea is heating up again, 4) The key JPY/KRW cross has fallen to its lowest level since early 2008, 5) Russia and Venezuela signed a $14 bln investment deal