Tuesday , April 25 2017
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Win Thin

Win Thin

Win Thin is a senior currency strategist with over fifteen years of investment experience. He has a broad international background with a special interest in developing markets. Prior to joining BBH in June 2007, he founded Mandalay Advisors, an independent research firm that provided sovereign emerging market analysis to institutional investors. He received an MA from Georgetown University in 1985 and a B.A. from Brandeis University 1983. Feel free to contact the Zurich office of BBH

Articles by Win Thin

Emerging Markets: Preview of the Week Ahead

8 days ago

Stock Markets
EM FX was mostly firmer last week, helped by Trump comments and softer US data.  Whilst this seems positive for EM, the global backdrop remains uncertain.  Some in EM (Russia, Turkey, and Korea) remain vulnerable to geopolitical concerns. In addition, idiosyncratic domestic political risks remain in play for other EM countries, such as Brazil, South Africa, and Turkey.  We expect the investment climate for EM to remain challenging this week.

Stock Markets Emerging Markets, April 11 Source: Economist.com – Click to enlarge

Singapore
Singapore reports March trade Monday, with NODX expected to rise 8.1% y/y vs. 21.5% in February.  Despite firmer data, the MAS left policy unchanged last week and

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Emerging Markets: What has Changed

9 days ago

Summary
Malaysia’s central bank said it will allow investors to fully hedge their currency exposure.
Egypt declared a 3-month state of emergency after two deadly church attacks.
South Africa’s parliamentary no confidence vote has been delayed
Argentina central bank surprised markets with a 150 bp hike to 26.25%.
Brazil central bank accelerated the easing cycle with a 100 bp cut in the Selic rate.
Stock Markets
In the EM equity space as measured by MSCI, South Africa (+3.1%), Turkey (+2.5%), and the Philippines (+0.9%) have outperformed this week, while Russia (-3.9%), Peru (-3.4%), and Brazil (-2.6%) have underperformed.  To put this in better context, MSCI EM fell -0.3% this week while MSCI DM fell -0.7%.
In the EM

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Emerging Markets Preview for the Week Ahead

16 days ago

Stock Markets

EM FX ended the week on a soft note, as the weaker than expected US jobs data was unable to derail the dollar’s rally. For the week, the worst performers were ZAR (-3%), TRY (-2.5%), and RUB (-2%). CZK bucked the trend, rising after the CNB exited the cap. This week, higher inflation readings in the US could draw market focus back to Fed tightening, which would be negative for EM. Risks of further flare ups in Syria could also lead to risk-off trading.

Stock Markets Emerging Markets, April 05 Source: economist.com – Click to enlarge

China
China reports March money and new loan data this week, but no date has been set. March CPI and PPI will be reported Wednesday. The former is expected to rise

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End of EUR/CZK peg: Czech National Bank

16 days ago

The Czech National Bank (CNB) ended the EUR/CZK floor today. Timing was a little earlier than expected, but rising inflation and a robust economy warranted it.  We think it’s too soon to talk about a rate hike, as we expect the koruna to overshoot to the strong side.
Policy Outlook
Price pressures are rising, with CPI accelerating to 2.5% y/y in February.  March data will be reported April 10, with consensus at 2.6% y/y.  If so, this would be the highest rate since November 2012 and is creeping closer to the top of the 1-3% target range. Given low base effects from 2016, we see risks that inflation moves above the target range this year.  Core CPI and PPI measures are also accelerating.
The worsening inflation

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Emerging Markets: What has Changed

18 days ago

Summary
Reserve Bank of India surprised markets with the start of the tightening cycle.
The Czech National Bank (CNB) ended the EUR/CZK floor.
Israeli central bank said it won’t hike rates until Q2 2018.
Both S&P and Fitch cut South Africa’s rating one notch to sub-investment grade BB+.
Moody’s put South Africa’s Baa2 rating on review for a downgrade
S&P upgraded Argentina one notch to B with stable outlook.
Brazil’s government will water down its pension reform plan
Brazil’s central bank corrected some errors in its inflation report.
Stock Markets
In the EM equity space as measured by MSCI, the Philippines (+3.8%), Chile (+3.5%), and Poland (+3.4%) have outperformed this week, while Korea (-0.7%), Turkey (-0.6%),

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Emerging Market: Preview for the Week Ahead

23 days ago

Stock Markets
EM FX was mixed last week.  The rebound in oil helped some, such as COP, RUB, and MXN.  On the other hand, idiosyncratic political risks weighed on South Africa.   This week could pose a challenge to EM, with lots of Fed speakers, FOMC minutes, and US jobs data.

Stock Markets Emerging Markets, March 29 Source: economist.com – Click to enlarge

Thailand
Thailand reports March CPI Monday, which is expected to rise 1.30% y/y vs. 1.44% in February.  If so, this would be moving closer to the bottom of the 1-4% target range.  BOT just left rates steady at 1.5% last week.  We expect inflation to pick up again, and so BOT should tilt more hawkish as the year progresses.  Next policy meeting is May 24, and

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Emerging Market: Preview for the Week Ahead

23 days ago

Stock Markets
EM FX was mixed last week.  The rebound in oil helped some, such as COP, RUB, and MXN.  On the other hand, idiosyncratic political risks weighed on South Africa.   This week could pose a challenge to EM, with lots of Fed speakers, FOMC minutes, and US jobs data.

Stock Markets Emerging Markets, March 29 Source: economist.com – Click to enlarge

Thailand
Thailand reports March CPI Monday, which is expected to rise 1.30% y/y vs. 1.44% in February.  If so, this would be moving closer to the bottom of the 1-4% target range.  BOT just left rates steady at 1.5% last week.  We expect inflation to pick up again, and so BOT should tilt more hawkish as the year progresses.  Next policy meeting is May 24, and

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Emerging Markets: What has Changed

26 days ago

Summary
Former Korean President Park was arrested.
Hungary’s central bank was more dovish than expected.
South African President Zuma finally fired Finance Minister Gordhan.
Brazil’s meat industry may have seen the worst of the scandal.
Banco de Mexico slowed the pace of tightening.
Stock Markets
In the EM equity space as measured by MSCI, Colombia (+2.0%), Brazil (+2.0%), and Singapore (+1.2%) have outperformed this week, while Egypt (-1.5%), Turkey (-1.3%), and Poland (-1.2%) have underperformed.  To put this in better context, MSCI EM fell -0.6% this week while MSCI DM rose 0.6%.
In the EM local currency bond space, the Philippines (10-year yield -23 bp), India (-16 bp), and Hungary (-11 bp) have outperformed

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Emerging Markets: Week Ahead Preview

March 27, 2017

Stock Markets
EM FX ended the week on a firm note. Indeed, virtually all of EM was up against the dollar last week, led by ZAR and MXN. BRL and PHP were the laggards. It remains to be seen how markets react to the failure to pass the health care reform in the US. Will Trump move on the tax reform? Can the Republicans proceed with its agenda in light of the fissures within the party?

Stock Markets Emerging Markets, March 25 Source: economist.com – Click to enlarge

Mexico
Mexico reports February trade and January GDP proxy Monday. Banco de Mexico meets Thursday and is expected to hike rates 25 bp to 6.5%. Mid-March CPI rose 5.29% y/y, a cycle high and further above the 3% target. We think Banxico will have to hike

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Emerging Markets: What has Changed

March 25, 2017

[unable to retrieve full-text content]Reserve Bank of India will introduce a new monetary policy tool. Moody’s raised the outlook on Russia’s Ba1 rating from stable to positive. Fitch cut Saudi Arabia’s rating a notch to A+. Moody’s cut the outlook on Turkey’s Ba1 rating from stable to negative. China has temporarily suspended beef imports from Brazil.

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Emerging Markets: Week Ahead Preview

March 20, 2017

Stock Markets
EM FX had a stellar week, ending on a strong note in the aftermath of what the market perceived as a dovish Fed hike Wednesday.  Every EM currency except ARS was up on the week vs. USD, with the best performers ZAR, TRY, COP, and MXN. There are some risks ahead for EM this week, with many Fed speakers lined up and perhaps willing to push back against the market’s dovish take on the FOMC.

Stock Markets Emerging Markets, March 18 Source: Economist.com – Click to enlarge

Taiwan
Taiwan reports February export orders Monday, which are expected to rise 17.8% y/y vs. 5.2% in January.  The central bank holds its quarterly policy meeting Thursday and is expected to keep rates steady at 1.375%.  While the

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Emerging Markets: What has Changed

March 18, 2017

Summay
The PBOC increased the rates it charges for OMO and MLF by 10 bp.
Indian Prime Minister Modi’s BJP won elections in the state of Uttar Pradesh.
Czech central bank broached the possibility of a koruna cap exit later than mid-2017.
Kuwait became the first OPEC member to call for extended output cuts.
Moody’s raised the outlook on Brazil’s Ba2 rating from negative to stable.
Brazilian prosecutor Janot has given the Supreme Court a list of dozens of politicians that are suspected of receiving bribes.
Fitch revised its outlook on Colombia’s BBB rating from negative to stable.
Stock Markets
In the EM equity space as measured by MSCI, Russia (+4.8%), Mexico (+4.7%), and Poland (+4.1%) have outperformed this week,

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Emerging Markets: Preview of the Week Ahead

March 13, 2017

Stock Markets
EM FX ended last week on a firm note despite the strong US jobs data, with the dollar succumbing to some “buy the rumor, sell the fact” price action. We think the dollar should recover as the week begins, as it seems risky to be short/underweight dollars going into the FOMC meeting. With the Fed poised to hike 3 or perhaps 4 times this year, we don’t think EM FX can continue to rally the way it has so far this year. Friday’s price action may be more about positioning than the fundamentals.

Stock Markets Emerging Markets, March 10 Source: Economist.com – Click to enlarge

Turkey
Turkey reports January current account Monday, which is expected at -$2.8 bln vs. -$4.3 bln in December. The Central Bank

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Emerging Markets: What has Changed

March 11, 2017

Summary
North Korean banks subject to international sanctions have been banned from using Swift.
Korea’s Constitutional Court upheld Parliament’s motion to impeach President Park.
Singapore eased some property market curbs after a three-year decline in home prices.
Egypt partially reversed a cut in bread subsidies.
Nigeria’s President Buhari returned to the nation after spending nearly two months in the UK.
Moody’s moved its outlook on Argentina’s B3 rating from stable to positive.
Press reports that Brazil is considering a tax on FX transactions.
Stock Markets
In the EM equity space as measured by MSCI, Egypt (+3.5%), Korea (+0.9%), and Hong Kong (+0.5%) have outperformed this week, while Peru (-5.1%), Russia

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Emerging Market Preview for the Week Ahead

March 6, 2017

Stock Markets
EM FX was mostly softer last week, though it ended the week firmer, buoyed by outsized MXN gains Friday.  The Fed is sending very strong signals for a March hike, which should keep EM FX on its back foot.  However, with the March 15 FOMC embargo coming into effect, there will be no Fed speakers after Kashkari on Monday.  Jobs data on Friday will be the highlight, but given the Fed’s signals, we do not think a soft report will derail a hike next week.
EM CPI and real sector data this week should support our view that Asian and EMEA central banks will have to tilt more hawkish this week.  Latam data should show further disinflation that supports a more dovish tilt in that region.

Stock Markets Emerging

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Emerging Markets: What has Changed?

March 4, 2017

Summary
A Korean special prosecutor indicted Samsung chief Jay Y. Lee on bribery charges.
Korean press is reporting that China has told its travel agents to halt sales of holiday packages to South Korea.
Bulgaria’s interim government said it may apply to join the eurozone within a month.
South Africa’s main labor union Cosatu accepted a government-proposed minimum wage.
New Commerce Secretary Ross appears to be taking a less confrontational stance with regards to Nafta.
Press reports suggest Mexico may request a swap line from the Fed.
Peru’s central bank cut reserve requirements again.
Stock Markets
In the EM equity space as measured by MSCI, Turkey (+1.5%), Czech Republic (+1.4%), and Mexico (+1.2%) have

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Emerging Markets: Preview of the Week Ahead

February 27, 2017

Stock Markets

EM FX ended last week on a soft note despite lower US rates. The dollar regained some traction that it lost over the course of the week, when markets pushed out Fed tightening beyond March. Treasury Secretary Mnuchin also seemed to push out fiscal stimulus. There is a full slate of Fed speakers this week, and Wednesday sees the release of the Fed’s Beige book that was prepared for the March 15 FOMC meeting.

Idiosyncratic events helped EM last week too, as MXN was boosted by the FX hedging plan and signs of thawing US-Mexico relations. Looking ahead, China gives us its first glimpse of the mainland economy in February. EM trade and inflation data for February will also start to be reported, with

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Emerging Markets: What has Changed

February 25, 2017

Summary
PBOC tweaked its process for determining the yuan reference rate.
Singapore is reportedly studying measures to boost revenue, including higher taxes.
Moody’s upgraded the outlook on Russia’s Ba1 rating from negative to stable.
Nigerian President Buhari extended his stay abroad.
Nigerian central bank tweaked its FX restrictions, but was aimed at retail demand.
Brazil political risk is back on the table.
Brazil’s central bank hinted at a faster pace of easing.
Banco de Mexico announced a new $20 bln FX hedging facility.
Stock Markets
In the EM equity space as measured by MSCI, Mexico (+2.7%), India (+1.4%), and Indonesia (+1.3%) have outperformed this week, while Egypt (-5.2%), Hungary (-3.4%), and Russia

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Emerging Markets: Preview of the Week Ahead

February 20, 2017

Stock Markets
EM FX ended last week on a soft note, as some risk off sentiment crept back into the markets. The dollar gained broadly on Friday despite lower US rates as bonds rallied, the yen gained and equities sold off. Markit PMI for February Tuesday and FOMC minutes Wednesday could give the markets some further clues regarding Fed policy. We believe markets are underestimating the Fed’s capacity to tighten this year, which will eventually lead to stresses for EM.

Stock Markets Emerging Markets February 15 Source: economist.com – Click to enlarge

Taiwan
Taiwan reports January export orders Monday, which are expected to rise 7.4% y/y vs. 6.3% in December. Q4 current account data will also be

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Emerging Markets: What has Changed

February 18, 2017

Summary
Head of Samsung Group Jay Y. Lee was formally arrested on allegations of bribery, perjury, and embezzlement.
The assassination of Kim Jong Un’s half-brother suggests the political situation in North Korea may be heating up.
The Polish central bank is tilting more hawkish.
The Turkish central bank said it will allow domestic companies to use liras to repay export loans.
Nigerian President Buhari may re-emerge into the public eye soon.
South African regulators are investigating a dozen banks in New York and Johannesburg for possible collusion in off-shore ZAR trading.
Mexico’s President Pena Nieto has reportedly asked Banco de Mexico Governor Carstens to stay on until December.
New Venezuelan Vice

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Emerging Market Preview of the Week Ahead

February 13, 2017

Stock Markets
EM FX ended last week on a firm note. Falling US rates allowed many foreign currencies to gain some traction. This week, a heavy US data slate is likely to test the market’s convictions on the Fed, with January PPI, CPI, IP, and retail sales all being reported. Yellen also testifies before Congress on Tuesday and Wednesday.

Stock Markets Emerging Markets February 08 Source: economist.com – Click to enlarge

India
India reports January CPI Monday, which is expected to rise 3.24% y/y vs. 3.41% in December. It then reports January WPI Tuesday, which is expected to rise 4.35% y/y vs. 3.39% in December. The RBI left rates steady last week and moved to a neutral stance. Price pressures are likely to

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Emerging Markets: What Has Changed

February 11, 2017

Summary
Reserve Bank of India signaled an end to the easing cycle.
S&P moved the outlook on Indonesia’s BBB- rating from stable to positive.
The ruling Law and Justice party in Poland may be backing off of plans to force banks to convert $36 bln in foreign currency loans.
Romanian Justice Minister Lordache resigned.
Local press is reporting that Brazil’s central bank may cut the 2019 inflation target from 4.5% to 4.25%.
Stock Markets
In the EM equity space as measured by MSCI, Poland (+4.0%), UAE (+3.3%), and Peru (+3.1%) have outperformed this week, while Russia (-2.2%), Colombia (-1.8%), and Turkey (-1.4%) have underperformed.  To put this in better context, MSCI EM rose 1.1% this week while MSCI DM rose 0.4%.
In

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Emerging Markets: Week Ahead Preview

February 6, 2017

Stock Markets
EM ended the week on a firm note, with markets digesting what they perceived as a dovish Fed bias.  We disagree, and continue to believe that markets are underestimating the Fed’s capacity to tighten this year.
EM FX could continue gaining some traction if the dollar correction continues, but we think US interest rates will ultimately move higher and put pressure on EM once again.

Stock Markets Emerging Markets February 06 Source: economist.com – Click to enlarge

China
Caixin reports China January composite and services PMI readings Monday. Last week, official services PMI reading ticked higher to 54.6, so there are small upside risks to the Caixin data. Note, however, that manufacturing PMI

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Emerging Markets: What has Changed

February 4, 2017

Summary
Philippine Environment Department suspended 5 mines and closed 21 after a nationwide audit.
The Turkish central bank raised its end-2017 forecast from 6.5% to 8% due largely to the weak lira.
Central Bank of Turkey finally got around to releasing the schedule of its MPC meetings this year.
Fitch downgraded Turkey last Friday to sub-investment grade BB+, as expected.
Allies of Brazil President Michel Temer now head up both houses of congress.
Press reports that the Mexican government has told state governors that it is canceling the planned gasoline price increase tomorrow.
Stock Markets
In the EM equity space as measured by MSCI, Turkey (+5.7%), Colombia (+2.5%), and Mexico (+2.4%) have outperformed this

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Emerging Markets: Preview of the Week Ahead

January 30, 2017

Stock Markets
EM was truly mixed last week, pulled in both directions by both idiosyncratic risks and global developments.  MXN, BRL, and ZAR were the best performers on the week, while TRY, HUF, and RON were the worst.  MXN gained despite signs that Trump will maintain a bellicose stance towards Mexico, but we think the peso remains vulnerable to further selling.  
Markets ignored reports that the PBOC has asked banks to limit lending, which we think is negative for growth and EM in general.  Several EM countries were either downgraded or had their outlooks cut last week, including Turkey, Nigeria, and Chile.  S&P affirmed China’s AA- rating but maintained a negative outlook due to rising financial risks.  Our

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Emerging Markets: What has Changed

January 28, 2017

Summary
Press reports suggest that China’s central bank has ordered banks to limit new loans in Q1.
Fitch revised the outlook on Nigeria’s B+ rating from stable to negative.
Russia announced details of the FX purchase plan.
Brazil’s central bank confirmed it will simplify the reserve requirement system for banks.
S&P cut the outlook on Chile’s AA- rating from stable to negative.
Mexican announced another hike in fuel prices will take place on February 4.
Mexican President Pena Nieto canceled a planned meeting with President Trump as tensions flare
Stock Markets
In the EM equity space as measured by MSCI, Mexico (+5.1%), Russia (+4.5%), and Poland (+4.0%) have outperformed this week, while UAE (-1.5%), Hungary

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Emerging Markets: Preview for the Week Ahead

January 23, 2017

Stock Markets
EM FX ended last week on a firm not, led by a huge MXN rally on Inauguration Day. We believe that the peso rally was largely driven by positioning and technicals, and so we view Friday’s gains as a correction since the fundamental outlook remains unchanged. Indeed, we think the broader EM rally will be short-lived too, as US interest rates remain elevated. The 10-year yield flirted with the 2.5% level, and we believe it will eventually head even higher.
Several EM central banks meet this week, including Israel, Turkey, Hungary, South Africa, and Colombia. Of these, Turkey’s is the most important as we believe that a big rate hike is needed to help support the lira. Colombia is expected to continue

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Emerging Markets: What has Changed

January 21, 2017

Summary
Prime Minister Phuc said Vietnam will ease the limits on foreign ownership of banks this year.
Russia’s government is working on measures to limit ruble volatility, including possible FX purchases.
Turkey’s central bank start auctioning FX swaps to help support the lira.
Brazil’s central bank resumed rolling over FX swaps.
Brazilian Supreme Court Judge Zavascki was tragically killed in a plane accident.
Chile’s central bank started the easing cycle.
Mexico significantly lowered its FDI forecast for 2017.
Stock Markets
In the EM equity space as measured by MSCI, Turkey (+2.1%), Qatar (+2.1%), and Brazil (+2.0%) have outperformed this week, while Russia (-1.8%), Thailand (-1.5%), and South Africa (-1.0%) have

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Emerging Markets: Week Ahead Preview

January 15, 2017

Stock Markets
EM FX ended the week mixed. Markets continue to grapple with the outlook for the so-called Trump Trade, which we believe is intact. MXN and TRY recovered from the relentless selling of recent days, but both remain vulnerable. Indeed, if the jump in US yields on Friday continues this week, most of EM should remain under pressure.

Stock Markets Emerging Markets January 16 Source: Economist.com – Click to enlarge

India
India reports December WPI Monday, which is expected to rise 3.50% y/y vs. 3.15% in November. December CPI came in slightly lower than expected at 3.41% y/y, and so there are some downside risks to WPI. RBI next meets February 8 and it will be a tough call since the impact of the

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Emerging Markets: What has Changed

January 14, 2017

Summary
China’s government has asked banks to balance their yuan inflows and outflows.
Indonesia partially lifted a ban on exports of nickel ore and bauxite.
Czech President Zeman picked two new central bankers as the end of the koruna cap looms.
Turkish central bank is taking limited measures to support the lira.
Turkey’s parliament voted 338-134 to discuss proposed constitutional changes that would increase the power of the presidency.
Brazil central bank accelerated the pace of easing.
Stock Markets
In the EM equity space as measured by MSCI, Turkey (+5.9%), Brazil (+3.1%), and Chile (+2.7%) have outperformed this week, while Indonesia (-2.0%), Russia (-1.4%), and Colombia (-1.2%) have underperformed.  To put

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