EM FX ended last week on a firm note, shrugging off political risk that consumed markets earlier in the week. With US rates remaining low, the dollar remains under pressure against the majors, and so EM FX is likely to benefit also. Yet we warn investors not to jump back into EM countries that are inherently riskier, such as Brazil, South Africa, and Turkey. We continue to favor Asia in the current environment.
Stock Markets Emerging Markets, May 17 Source: economist.com – Click to enlarge
Taiwan reports April export orders Monday, which rose 12.3% y/y in March. It reports April IP Tuesday, which is rose 3.2% y/y in March. The central bank does not have an explicit inflation target, but low price pressures should allow it to keep rates steady at its quarterly policy meeting in June.
Singapore reports April CPI Tuesday, which is expected to rise 0.5% y/y vs. 0.7% in March. The MAS does not have an explicit inflation target, but low price pressures led it to keep policy accommodative at its April meeting. Many look for a change in MAS forward guidance at its October meeting that sets the table for tightening in 2018. Singapore then reports April IP Friday, which is expected to rise 5.5% y/y vs. 10.2% in March.