Category: Emerging Markets

Is the Tone in Emerging Markets Taking a Positive Turn?


EM is starting the week on a positive footing.  Aside from the recovery in global risk appetite, the uptick in commodity prices and the broader weaker tone in the dollar, we think the price action in Brazil has helped EM more generally.  In our view, the (relatively) positive news flows and the subsequent strong rally in all asset classes has helped to change the tone for EM.  The question is whether it can last (a question we will address in an upcoming report).  While it is far too early to say that EM has turned a corner, it looks as if we are reaching a more mature s

Where do Emerging Markets Stand Entering Q4?


1) Colombia’s central bank unexpectedly hiked its policy rate 25 bp to 4.75%, 2) Mexico extended its FX auctions, 3) Petrobras raised prices for gasoline and diesel for the first time in almost a year, 4) China’s central bank cut the minimum down payment for first-time home buyers, 5) The central bank of Indonesia said it will start FX interventions in the forward market, joining the growing number of countries stepping up against currency weakness, 6) Kazakhstan’s central bank hiked its base rate 400 bp to 16% and narrowed the rates corridor to +/- 1 percentage point.

The Emerging to Developed Market Hurdle


There are 195 sovereign states, according to the United Nations, and two, “observer states” (Vatican and Palestine).  The high income countries in North America, Western Europe and Asia-Pacific account for about 15% of the sovereign states.  Most of the rest of the world live in low and medium income countries. 

All is not Lost in Emerging Markets


The end of a horrendous quarter of equities and emerging markets is generating a sigh of relief that is helping lift those battered markets.  The MSCI Emerging Market is up almost 1.75% prior to the open of the Latam markets.  Its Asian-Pacific Index is up 2.1%.  The Dow Jones Stoxx 600 is up 2% near midday in London led consumer staples and materials.   Core bond yields are firmer, including US 10-year Treasuries, which are back at 2.09% after testing 2.04% yesterday. 

Brazil Sets a Negative Tone for Emerging Markets


In a still familiar refrain, EM assets are starting the week off on a soft note.  The global backdrop remains negative, with Yellen’s speech bringing Fed lift-off back into focus.  US jobs data this Friday should support the notion of lift-off by year-end.  Chinese data is likely to remain soft, while commodity prices are still struggling to get some traction.  MSCI EM is on track to test the low from August near 763, while the EMBI Global spread is on track to test the August high near 474 bp.

Emerging Market Headwinds Remain in Place


Once again, EM assets are starting the week of on a soft note.

A Preview of Emerging Market News and Events


In a familiar refrain, EM assets start the week on a soft note, with markets picking up where the left off on Friday. With China markets reopening after a two-day holiday, the Shanghai dropped -2.5% and has fed into wider EM equity losses. MSCI EM is down two straight days and five of the past six. The strong US jobs report Friday also brings the Fed lift-off back into focus. Many EM currencies are either making new multi-year lows (IDR, MYR) or making new all-time lows (BRL, TRY). We see more and more currencies following suit in the coming weeks.

Central Bank Intervention Led Emerging Markets News This Week


1) Reports suggest the PBOC will impose a 20% reserve requirement on financial institutions trading FX forwards, 2) The HKMA had to intervene this week at the strong side (7.75) of the HKD peg, 3) Swiss authorities are getting involved in the 1MDB scandal in Malaysia, 4) Brazil’s government will submit budget proposal for 2016 that projects a primary deficit, 5) Brazil’s COPOM kept rates steady at 14.25% this month, as expected, 6) Press reports suggest Obama now has the votes to push the Iran deal through Congress, 7) Israel is injecting some fiscal stimulus to boost the econom

BRIC or ICRB


Back in 2001, former Goldman Sachs chief economist Jim O’Neill coined the acronym BRIC to highlight the immense economic potential of the emerging markets of Brazil, Russia, India, and China in the decades to come. They would be the economic engines of tomorrow, he wrote.

Investors are Still Running from Emerging Markets, but not as Fast


EM is starting the week with a weak tone, though the panic of last week has abated for now.  The bounce in commodity prices seems to have run out of steam, which is not helping market sentiment.  Fed Vice Chair Fischer’s comments from Jackson Hole has put the September FOMC meeting back into play, and firm US jobs data Friday would support notions of a Fed liftoff then.  We remain bearish on EM assets for now given the negative global backdrop.