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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

4 days ago

Stock Markets
EM FX ended the week on a firm note, helped by softer than expected US data.  Indeed, EM FX was up across the board for the entire week and was led by BRL, MXN, and ZAR. The ECB meeting this week will draw some interest, especially after the BOC last week became the second major central bank to hike rates.

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

Hungary
National Bank of Hungary meets Tuesday and is expected to keep policy steady. The bank has been loosening policy quarterly via unconventional measures, which it just did at its June meeting. Further easing is possible at the September meeting. CPI rose only 1.9% y/y in June, the lowest since December and

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Emerging Markets: What has Changed

6 days ago

Summary
Pakistani Prime Minister Nawaz Sharif may face trial on corruption charges.
Turkey will reportedly pay $2.5 bln for a Russian missile defense system.
Nigeria said it was willing to cap its oil production to support OPEC efforts to cut global supply.
Former Brazilian President Lula was sentenced to nine and half years in prison on corruption charges.
S&P downgraded Chile one notch to A+ with a stable outlook.
A consortium of three private companies discovered 1.4-2.0 bln barrels of new oil in Mexico.
S&P downgraded Venezuela by a notch to CCC- and kept the negative outlook.
Stock Markets
In the EM equity space as measured by MSCI, Brazil (+8.5%), Qatar (+6.6%), and Egypt (+5.8%) have outperformed this week,

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Emerging Markets: Preview of the Week Ahead

June 12, 2017

Stock Markets

EM FX was mixed last week but in general held up well in the aftermath of Super Thursday. The global backdrop seems relatively benign right now despite the FOMC meeting this week. We still think investors have to be picky.

TRY, ZAR, and BRL at current levels seem too rich given the underlying risks in all three. On the flip side, we think China is looking stable right now and should help Emerging Asia’s outlook near-term.
 

Stock Markets Emerging Markets, June 07 Source: economist.com – Click to enlarge

China

China will report May money and new loan data sometime this week. No date has been specified, but these series are expected to show some modest slowing from April. May IP and retail

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Emerging Markets: What has Changed

June 10, 2017

Summary:
The Reserve Bank of India cut its inflation forecast for FY2017/18.
South Korean President Moon suspended the installation of the remaining components of the THAAD missile shield.
S&P cut Qatar one notch to AA-.
Turkey looks likely to get caught up in yet another regional conflict.
Brazil’s structural reform agenda has been delayed as President Temer remains on the ropes.
Stock Markets
In the EM equity space as measured by MSCI, Peru (+2.9%), China (+2.5%), and Poland (+1.5%) have outperformed this week, while Qatar (-6.1%), South Africa (-1.7%), and Indonesia (-1.5%) have underperformed. To put this in better context, MSCI EM rose 0.6% this week while MSCI DM fell -0.4%.

In the EM local currency bond

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Emerging Markets: Preview of the Week Ahead

June 5, 2017

Stock Markets
EM FX closed last week on a firm note as weak US jobs data supported the notion that the Fed will find it hard to tighten in H2.  No major US data will be reported this week and the FOMC embargo for the June 14will be in effect.  As such, there is little on the near-term horizon that might help the dollar, so it’s likely to remain on the defensive this week.
As always, political risk in EM remains significant.  Brazil and South Africa continue to simmer, and we see more bad news ahead from both.  As of this writing, the outcome of the Mexican state elections is not yet known.  

Stock Markets Emerging Markets, May 31 Source: economist.com – Click to enlarge

China
Caixin reports May China services

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Emerging Markets: What has Changed

June 3, 2017

Summary
The Indonesian cabinet is discussing revisions to the 2017 state budget.
The Thai central bank plans to reform some FX rules.
South African President Zuma survived the no confidence vote within his own ANC.
Brazil’s central bank signaled a slower pace of easing ahead after it cut 100 bp again.
Moody’s cut the outlook on Brazil’s Ba2 rating from stable to negative.
Stock Markets
In the EM equity space as measured by MSCI, Egypt (+4.7%), Hong Kong (+2.2%), and Hungary (+1.9%) have outperformed this week, while Russia (-3.2%), South Africa (-3.2%), and Brazil (-2.5%) have underperformed. To put this in better context, MSCI EM fell -0.3% this week while MSCI DM rose 0.9%.
In the EM local currency bond space,

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Emerging Markets: What has Changed

June 3, 2017

Summary
The Indonesian cabinet is discussing revisions to the 2017 state budget.
The Thai central bank plans to reform some FX rules.
South African President Zuma survived the no confidence vote within his own ANC.
Brazil’s central bank signaled a slower pace of easing ahead after it cut 100 bp again.
Moody’s cut the outlook on Brazil’s Ba2 rating from stable to negative.
Stock Markets
In the EM equity space as measured by MSCI, Egypt (+4.7%), Hong Kong (+2.2%), and Hungary (+1.9%) have outperformed this week, while Russia (-3.2%), South Africa (-3.2%), and Brazil (-2.5%) have underperformed.  To put this in better context, MSCI EM fell -0.3% this week while MSCI DM rose 0.9%.
In the EM local currency bond space,

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Emerging Markets: Week Ahead Preview

May 29, 2017

Stock Markets
EM FX closed last week on a mixed note, with markets struggling to find a compelling investment theme. The US jobs data this week could provide some more clarity on Fed policy. We still think markets are still underestimating political risk in the big EM countries, including Brazil (Moody’s outlook moved to negative), Mexico (election in state of Mexico), South Africa (ANC debates Zuma’s fate), and Turkey (ongoing crackdown on opposition).

Israel
Bank of Israel meets Monday and is expected to keep rates steady at 0.10%. CPI rose 0.7% y/y in April, below the 1-3% target range. With the shekel remaining firm, the central bank is likely to keep rates steady whilst continuing to buy USD/ILS.
South

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Emerging Markets: Week Ahead Preview

May 29, 2017

Stock Markets
EM FX closed last week on a mixed note, with markets struggling to find a compelling investment theme. The US jobs data this week could provide some more clarity on Fed policy.  We still think markets are still underestimating political risk in the big EM countries, including Brazil (Moody’s outlook moved to negative), Mexico (election in state of Mexico), South Africa (ANC debates Zuma’s fate), and Turkey (ongoing crackdown on opposition).

Israel
Bank of Israel meets Monday and is expected to keep rates steady at 0.10%. CPI rose 0.7% y/y in April, below the 1-3% target range. With the shekel remaining firm, the central bank is likely to keep rates steady whilst continuing to buy USD/ILS.
South

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Emerging Markets: Preview of the Week Ahead

May 22, 2017

Stock Markets
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
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
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.

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Emerging Markets: What Has Changed

May 20, 2017

Summary
China’s government approved the creation of a bond link between Hong Kong and the mainland.
S&P upgraded Indonesia one notch to investment grade BBB- with stable.
Fitch revised the outlook on Vietnam’s BB- rating from stable to positive.
Egypt will announce a package of social spending soon.
Moody’s changed the outlook on Poland’s A2 rating from negative to stable.
Brazil press reported that meat-packing company JBS has submitted compromising tape recordings to the Supreme Court.
Chile central bank surprised markets with a 25 bp cut but signaled a move to a neutral bias.
Stock Markets
In the EM equity space as measured by MSCI, Hungary (+2.6%), Indonesia (+2.0%), and Peru (+1.4%) have outperformed this week, while Brazil (-11.1%), Poland (-1.8%), and Egypt (-1.7%) have underperformed.  To put this in better context, MSCI EM fell -0.3% this week while MSCI DM was flat.

In the EM local currency bond space, India (10-year yield -11 bp), Korea (-7 bp), and Peru (-4 bp) have outperformed this week, while Brazil (10-year yield +155 bp), Argentina (+28 bp), and Turkey (+22 bp) have underperformed.  To put this in better context, the 10-year UST yield fell 8 bp to 2.25%.
In the EM FX space, SGD (+1.3% vs. USD), ZAR (+1.0% vs. USD), and THB (+0.9% vs. USD) have outperformed this week, while BRL (-4.

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Emerging Market Preview: Week Ahead

May 15, 2017

Stock Markets
EM FX ended last week on a firmer note, helped by lower US rates and softer than expected CPI and retail sales data. Stabilizing commodity prices also helped EM. Yet these supportive conditions seem unlikely to persist, and we remain defensive on EM.  

Stock Markets Emerging Markets, May 10 Source: economist.com – Click to enlarge

Brazil
Brazil will report April tax collections this week, but no date has been scheduled. Collections are expected to rise 8% vs. 3% in March. If so, that would set the table for better budget data that month. The fiscal numbers worsened in March, reflecting a weak economy and rising borrowing costs.
China
China reports April retail sales and IP Monday. The former is expected to rise 10.8% y/y and the latter by 7.0% y/y. With the exception of new loans, April data have come in a bit on the soft side but markets appear comfortable with this.
Poland
Poland reports March trade and current account data Monday. It reports Q1 GDP Tuesday, which is expected to grow 3.9% y/y vs. 2.7% in Q4. National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%. Poland then reports April industrial and construction output, PPI, and retail sales Friday, with the data expected to show some moderation from the strong March readings.

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Emerging Markets: What Has Changed

May 13, 2017

Summary
Moon Jae-in was elected president of South Korea
Philippine President Duterte named Nestor Espenilla as central bank governor
Nigerian President Buhari traveled to London for a follow-up to the initial medical visit earlier this year
Market expectations for 2018 inflation in Brazil rose for the first time in more than a year
Peru’s central bank unexpectedly started the easing cycle with a 25 bp cut to 4.0%
Stock Markets
In the EM equity space as measured by MSCI, Brazil (+5.5%), Hungary (+4.3%), and Colombia (+4.3%) have outperformed this week, while Thailand (-0.9%), Poland (-0.7%), and the Philippines (-0.6%) have underperformed.  To put this in better context, MSCI EM rose 2.5% this week while MSCI DM fell -0.2%.
In the EM local currency bond space, Poland (10-year yield -14 bp), Brazil (-12 bp), and Hungary (-10 bp) have outperformed this week, while Czech Republic (10-year yield +25 bp), Argentina (+21 bp), and Turkey (+17 bp) have underperformed.  To put this in better context, the 10-year UST yield fell 1 bp to 2.34%.
In the EM FX space, RUB (+1.5% vs. USD), BRL (+1.4% vs. USD), and MXN (+1.2% vs. USD) have outperformed this week, while TRY (-0.7% vs. USD), PEN (-0.5% vs. USD), and ARS (-0.3% vs. USD) have underperformed.

Stock Markets Emerging Markets, May 13 Source: economist.

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Emerging Markets Preview

May 8, 2017

Stock Markets
EM FX got some limited traction as the week closed, helped by stabilizing commodity prices.  However, oil, copper, and iron ore have all broken important technical levels that suggest further weakness ahead.  We also think the FOMC and jobs data support our view that the next Fed hike will be in June. This backdrop should keep EM on the defensive this week.  

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

China
China reports April trade figures on Monday. Exports are expected to rise 11.3% y/y and imports by 18.0% y/y. China reports April CPI and PPI Wednesday. The former is expected to rise 1.1% y/y while the latter is expected to rise 6.7% y/y. For now, markets are digesting signs of slowing in China’s economy.
Turkey
Turkey reports March IP Monday, which is expected to rise 2.5% y/y vs. 1.0% in February. It then reports March current account data Thursday, which is expected at -$3.20 bln vs, -$2.53 bln in February. If so, the 12-month total would fall slightly to -$33.2 bln. External accounts are in good shape, but mostly due to sluggish growth.
Taiwan
Taiwan reports April trade Monday. Exports are expected to rise 10.9% y/y and imports by 18.0% y/y. EM trade data has come in largely stronger than expected in April, and Taiwan should be no exception.

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Emerging Markets: What has Changed

May 6, 2017

Summary
Relations between China and North Korea appear to be worsening.
The THAAD missile shield has been deployed earlier than expected in South Korea.
An amendment to India’s Banking Regulation Act gives the RBI more power to address bad loans.
Tensions are rising between Czech Prime Minister Sobotka and Finance Minister Babis.
Brazil pension reform bill was passed 23-14 in the lower house special committee.
Stock Markets
In the EM equity space as measured by MSCI, the Philippines (+2.4%), UAE (+2.3%), and Singapore (+2.1%) have outperformed this week, while Russia (-4.3%), Turkey (-1.8%), and Qatar (-1.6%) have underperformed.  To put this in better context, MSCI EM fell -0.4% this week while MSCI DM rose 0.7%.

In the EM local currency bond space, Czech Republic (10-year yield -10 bp), Hungary (-5 bp), and India (-5 bp) have outperformed this week, while Russia (10-year yield +18 bp), Argentina (+16 bp), and Colombia (+8 bp) have underperformed.  To put this in better context, the 10-year UST yield rose 8 bp to 2.36%. 

In the EM FX space, ILS (+0.7% vs. USD), ARS (+0.5% vs. USD), and HUF (+0.4% vs. EUR) have outperformed this week, while RUB (-2.7% vs. USD), ZAR (-1.7% vs. USD), and PEN (-1.3% vs. USD) have underperformed. 

Stock Markets Emerging Markets, May 06 Source: economist.

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Emerging Markets: Week Ahead Preview

May 1, 2017

Stock Markets
EM FX ended last week on a mixed note.  Indeed, the week and the month were also very much mixed for EM, reflecting a variety of global and country-specific drivers impacting these countries.  This week’s US jobs data could bring Fed tightening back as a major driver for EM.  
We will also get the first snapshots of trade in April from Korea and Brazil, as well as Caixin PMI readings for China.  Official April manufacturing PMI was reported over the weekend at 51.2 vs. 51.7 expected and 51.8 in March, and so there are downside risks to this week’s Caixin PMI readings.

Stock Markets Emerging Markets, April 26 Source: www.economist.com – Click to enlarge

Korea
Korea reports April trade data Monday.  Exports are expected to rise 17% y/y and imports by 18.7% y/y.  It then reports April CPI Tuesday, which is expected to rise 2.1% y/y vs. 2.2% in March.  Given downside risks from political uncertainty (both domestic and regional), we think the BOK will remain on hold for now.  Next policy meeting is May 25, no change expected then.
Thailand
Thailand reports April CPI Monday, which is expected to rise 0.72% y/y vs. 0.76% in March.  This would be below the BOT’s target range of 1.0-4.0%.

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Emerging Markets: What has Changed

April 29, 2017

Summary
Moody’s moved the outlook on Vietnam’s B1 rating from stable to positive.
Nigeria’s central bank introduced a new FX window for portfolio investors.
Moody’s moved the outlook on Romania’s Baa3 rating from positive to stable.
Central Bank of Russia accelerated its easing cycle.
Central Bank of Turkey delivered a hawkish surprise.
Brazil’s lower house easily approved the labor reforms, but popular resistance is rising.
Stock Markets
In the EM equity space as measured by MSCI, Poland (+5.0%), Korea (+3.0%), and South Africa (+2.9%) have outperformed this week, while Colombia (-3.3%), Chile (-3.3%), and Egypt (-2.4%) have underperformed.  To put this in better context, MSCI EM rose 1.6% this week while MSCI DM rose 2.1%.
In the EM local currency bond space, Czech Republic (10-year yield -16 bp), Colombia (-13 bp), and Russia (-10 bp) have outperformed this week, while Brazil (10-year yield +26 bp), Argentina (+16 bp), and South Africa (+6 bp) have underperformed.  To put this in better context, the 10-year UST yield rose 5 bp to 2.30%.
In the EM FX space, TRY (+2.6% vs. USD), MYR (+1.3% vs. USD), and ILS (+1.3% vs. USD) have outperformed this week, while COP (-2.7% vs. USD), CLP (-2.0% vs. USD), and BRL (-1.8% vs. EUR) have underperformed.

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Emerging Markets: Preview of the Week Ahead

April 17, 2017

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 maintained its commitment to keep policy loose for an “extended” period.  If data continue to firm, we expect a change in the forward guidance at the October meeting that sets the table for a 2018 tightening move.
China
China reports March retail sales and IP Monday.  The former is expected to rise 9.7% y/y, while the latter is expected to rise 6.3% y/y.  Q1 GDP will also be reported then, with growth expected to remain steady at 6.8% y/y.
India
India reports March WPI Monday, which is expected to rise 6.0% y/y vs. 6.55% in February.  Last week, March CPI came in at 3.

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Emerging Markets: What has Changed

April 17, 2017

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 local currency bond space, South Africa (10-year yield -18 bp), Poland (-8 bp), and Indonesia (-8 bp) have outperformed this week, while Brazil (10-year yield +11 bp), Peru (+9 bp), and Colombia (+9 bp) have underperformed.  To put this in better context, the 10-year UST yield fell 15 bp to 2.24%.
In the EM FX space, ZAR (+2.5% vs. USD), RUB (+1.9% vs. USD), and ARS (+1.2% vs. USD) have outperformed this week, while HUF (-0.9% vs. EUR), KRW (-0.5% vs. USD), and PLN (-0.5% vs. EUR) have underperformed.

Stock Markets Emerging Markets, April 11 Source: Economist.

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Emerging Markets Preview for the Week Ahead

April 10, 2017

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 1.0% y/y and the latter by 7.5% y/y. March trade will be reported at the end of the week. In USD terms, exports are expected to rise 3.4% y/y, while imports are expected to rise 15.5% y/y.
Venezuela
Venezuela has $2.1 bln in PDVSA debt payments due this week. Press reports suggest senior officials met last week and agree to continue servicing its external debt (for now). Despite the rebound in oil prices, foreign reserves have fallen to $10.4 bln in March, the lowest since May 2002. We believe default risk will remain elevated this year.

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End of EUR/CZK peg: Czech National Bank

April 9, 2017

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 outlook supported the case for an exit from the koruna cap.  While officials warned that rate hikes are now on the table, we see no move near-term.  Upcoming central bank policy meetings are May 4 and June 29.  We see very little risk of a rate hike at either one, despite Governor Rusnok’s warning today that a May hike can’t be rule out.
Looking ahead, a rate hike is possible in H2, but a lot will depend on how strong the koruna gets.  For a small open economy, a stronger currency can dramatically tighten monetary conditions.

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Emerging Markets: What has Changed

April 8, 2017

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%), and Peru (-0.5%) have underperformed.  To put this in better context, MSCI EM rose 0.3% this week while MSCI DM fell -0.5%.
In the EM local currency bond space, Bulgaria (10-year yield -11 bp), Chile (-6 bp), and South Africa (-6 bp) have outperformed this week, while India (10-year yield +17 bp), Turkey (+12 bp), and Indonesia (+10 bp) have underperformed.  To put this in better context, the 10-year UST yield fell 6 bp to 2.33%.
In the EM FX space, CZK (+1.7% vs. EUR), INR (+0.9% vs. USD), and EGP (+0.7% vs. USD) have outperformed this week, while ZAR (-3.0% vs. USD), TRY (-2.7% vs.

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Emerging Market: Preview for the Week Ahead

April 3, 2017

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 we expect steady rates again.
Indonesia
Indonesia reports March CPI Monday, which is expected to rise 3.80% y/y vs. 3.83% in February.   The target range is 3-5%, but Bank Indonesia has signaled that the easing cycle is over, and should lean more hawkish this year if inflation continues to rise.  Next policy meeting is April 20, we expect rates to be kept steady at 4.75%.
Turkey
Turkey reports March CPI Monday, which is expected to rise 10.70% y/y vs. 10.13% in February.

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Emerging Market: Preview for the Week Ahead

April 3, 2017

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 we expect steady rates again.
Indonesia
Indonesia reports March CPI Monday, which is expected to rise 3.80% y/y vs. 3.83% in February.   The target range is 3-5%, but Bank Indonesia has signaled that the easing cycle is over, and should lean more hawkish this year if inflation continues to rise.  Next policy meeting is April 20, we expect rates to be kept steady at 4.75%.
Turkey
Turkey reports March CPI Monday, which is expected to rise 10.70% y/y vs. 10.13% in February.

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Emerging Markets: What has Changed

March 31, 2017

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 this week, while Turkey (10-year yield +21 bp), the South Africa (+14 bp), and Malaysia (+7 bp) have underperformed.  To put this in better context, the 10-year UST yield was flat at 2.41%.
In the EM FX space, RUB (+1.5% vs. USD), PLN (+1.2% vs. EUR), and INR (+0.9% vs. USD) have outperformed this week, while ZAR (-7.9% vs. USD), BRL (-1.4% vs. USD), and TRY (-1.1% vs. USD) have underperformed.

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

Korea
Former Korean President Park was arrested.

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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 several more times this year to head off inflationary pressures.
Hungary
Hungary central bank meets Tuesday and is expected to keep policy unchanged. However, there is a chance that it makes a small symbolic cut to the deposit cap. CPI rose 2.9% y/y in February, the highest since January 2013 but just below the 3% target. While easing is nearing an end, we do not see tightening until next year.
Thailand
Bank of Thailand meets Wednesday and is expected to keep rates steady at 1.5%. CPI rose 1.4% y/y, down from the cycle high of 1.6% y/y in January and still well within the 1-4% target range.

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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 central bank does not have an explicit inflation target, rising price pressures are likely to push it into a more hawkish stance this year.  While steady rates are likely in 2017, the start of a tightening cycle is possible in 2018.  Taiwan also reports February IP Thursday, which is expected to rise 10% y/y vs. 2.8% in January.
Chile
Chile reports Q4 GDP Monday, which is expected to grow 0.5% y/y vs. 1.6% in Q3.  If so, this would be the slowest rate since Q3 09.  No wonder the central bank is easing, as it just cut rates for a second time since the easing cycle started in January.

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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, while Qatar (-0.8%), UAE (-0.4%), and Hungary (+0.4%) have underperformed. To put this in better context, MSCI EM rose 4.3% this week while MSCI DM rose 1.0%.
In the EM local currency bond space, Turkey (10-year yield -37 bp), Indonesia (-26 bp), and South Africa (-16 bp) have outperformed this week, while Argentina (10-year yield +43 bp), Romania (+22 bp), and Czech Republic (+18 bp) have underperformed. To put this in better context, the 10-year UST yield fell 7 bp to 2.50%.
In the EM FX space, ZAR (+3.2% vs. USD), TRY (+3.1% vs. USD), and COP (+2.4% vs.

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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 meets Thursday and is expected to tighten policy with a 50 bp hike in the late liquidity window rate to 11.50%. Lately, the central bank has tightened by forcing banks to borrow at this window rather than at the overnight rate of 9.25%. We still think reliance on back door tightening reflects Erdogan’s heavy-handed tactics to prevent outright rate hikes.
China
China reports January-February retail sales and IP Tuesday. Because of Lunar New Year distortions, China bundles January and February together for these series. Retail sales are expected to rise 10.

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