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The Tide Lifting Emerging Markets’ Boats Goes Out

EM ended last week on a soft note. Perhaps the main driver was rising US yields, as markets become wary of a more hawkish Fed this Wednesday. Perhaps it was technical, as the EM rally became over-extended. Whatever the reasoning, the correction continued into the weekend and is likely to carry over to this week as well.

While we remain cautious on EM at such rich valuations, a significant correction (which we have not seen in quite some time) could make some assets more attractive. The global liquidity backdrop remains supportive of EM for now.

From Britain to Greece: Economic Woes Plague Europe’s Four Corners

Every corner of Europe is seeing renewed economic struggles that are fomenting political strife and revolutionary reforms.

In the United Kingdom, a Conservative government that once promised a referendum on EU citizenship is scrambling to convince its own populace to vote to remain in the UK. Foreign leaders, such as U.S. President Barack Obama, and economists, such as MIT’s Nobel-Prize-winner Paul Krugman, are urging Britain to vote to remain in the union, despite its flaws and weak economic growth.

Thai Government Prepares for Monarch Succession: The First in 70 Years

The government has plastered images of Crown Prince Maha Vajiralongkorn throughout the public sphere, as the prince stands ready to succeed the throne when his father passes, according Channel NewsAsia.

King Bhumibol Adulyadej is a revered figure, but some leaders fear his death could cause further uncertainty as Thailand undergoes political and economic instability. The king has ruled since 1946 and remains in a hospital recovering from hydrocephalus, among other illnesses.

Malaysia’s Free, but not that Fair, Elections

On 7 May residents of Sarawak, the larger of the two Malaysian states located on Borneo Island, will be going to the polls. Sarawak is the only one of Malaysia’s 13 states to hold its state and federal polls separately. This is the first election in Malaysia since the emergence of the 1Malaysia Development Berhad (1MDB) crisis engulfing Prime Minister Najib Razak.

India’s Budget Maintains Fiscal Prudence

On 29 February, Indian Finance Minister Arun Jaitley presented the National Democratic Alliance government’s third Union Budget. The government, having assumed office a little less than two years ago, is no longer new to the job.

It was expected to deliver on its promises of pro-growth, pro-business reform, issues that are of considerable importance to its urban, middle-class core constituency. The financial media in India, which draws its viewership from the same constituency, had warned that this would be a ‘make-or-break budget’ for the government.

An Emerging Markets Status Update

China’s central bank may be leaning less dovish, Turkey has a new central bank governor, Argentina issued external debt for the first time since it defaulted 15 years ago, Brazil’s lower house voted to impeach President Rousseff by a 367-137 vote

In the EM equity space, Russia (+2.7%), Indonesia (+1.9%), and UAE (+1.8%) have outperformed this week, while China (-3.0%), Taiwan (-1.9%), and Hungary (-1.2%) have underperformed. To put this in better context, MSCI EM fell -0.1% this week while MSCI DM rose 1.0%.

Questions Surround Congo President’s Re-election: Violence Continues

Republic of Congo (ROC) President Denis Sassou Nguesso won re-election in 2016, but activists and political opponents have contested his legitimacy through the court system, and the government actively targets opposition members through violence and arrest, according to The Washington Post.

The Week in Review: Sluggish Home Starts, Higher Existing Home Sales

Mixed data on housing surfaced this week as existing home sales saw a surprising upstart even as weak new home buying caused fear about homebuilders’ long-term profitability. Existing home sales rose by 5.1% in March, according to a new study by the National Association of Realtor (NAR). The NAR said higher activity in the Northeast and Midwest, historically weak regions after the 2009 Global Financial Crisis, helped drive overall sales higher.

Is Higher Education Making the Grade in Vietnam?

Vietnam has announced a bold new higher education reform agenda. The government of Vietnam will offer up to 10,000 government scholarships for overseas doctoral study between 2014 and 2020 (or 1300–1500 per year) to tertiary and research institute staff. The so-called 911 Project will also offer scholarships to qualified non-academic professionals committed to tertiary teaching careers.

Securing the India-Myanmar Border a Top Priority

On 31 March 2016, a tribunal set up by the Indian government upheld a ban on the National Socialist Council of Nagaland (Khaplang) (NSCN(K)) for five years. The case pertains to the 4 June 2015 attacks carried out by NSCN(K) insurgents on Indian military personnel, which claimed the lives of 18 Indian soldiers.