Thursday , September 19 2019
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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

Dollar Mixed, Oil Spikes as Markets Digest Saudi Attack

3 days ago

The weekend bombing of Saudi oil facilities continue to reverberate across global markets
The currencies of the oil producing nations are likely to outperform near-term
US rates continue to adjust ahead of the FOMC
UK Prime Minister Johnson is in Luxembourg today to meet with EC President Juncker
China reported weak August IP and retail sales
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The dollar is mixed against the majors as markets continue to digest the attack on Saudi oil facilities.  Yen and Loonie are outperforming, while Stockie and sterling are underperforming.  EM currencies are broadly weaker as risk-off impulses build.  RUB and KRW are outperforming, while INR and PHP are underperforming.  MSCI Asia Pacific ex-Japan was down 0.2% on the day, with Japan on holiday.  MSCI EM is down 0.1% so far

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Dollar Soft as Risk Sentiment Stoked Ahead of US Retail Sales

4 days ago

US-China relations appear to be thawing
Trading was volatile after the ECB decision; we are still dollar bulls
EM has benefitted from the shift in the global backdrop this week
The US data highlight is August retail sales
Vietnam cut rates 25 bp to 6.0%; Turkey reported July current account and IP
The dollar is mostly softer against the majors ahead of the US retail sales data. Sterling and Swissie are outperforming, while Kiwi and Loonie are underperforming. EM currencies are broadly firmer on continued signs of a US-China thaw. RUB and HUF are outperforming, while TRY and PHP are underperforming.  MSCI Asia Pacific was up 0.7% on the day, with the Nikkei rising 1.1%. MSCI EM is up 0.6% so far today, with China markets on holiday. Euro Stoxx 600 is up 0.1% near

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Turkey Monetary Policy Planting Seeds of Future Crisis

5 days ago

Turkey central bank meets September 12 and is expected to cut rates 275 bp.  With Erdogan talking about single digit rates and inflation, it’s clear that rates are headed significantly lower.  At some point soon, we think the risk/reward for investing in Turkey will send investors fleeing for the exits.POLITICAL OUTLOOK
President Erdogan sacked central bank Governor Murat Cetinkaya on July 6, ostensibly for not cutting rates quickly enough.  In early August, several high-ranking central bank officials were fired, including chief economist Hakan Kara.  Others that were fired include the central bank’s head of research, the banking department chief, and the risk management chief.  Who needs all these senior positions when President Erdogan is running monetary

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EM Preview for the Week Ahead

10 days ago

Despite some positive developments last week, we think the three key issues for risk assets have not been resolved yet.  Hong Kong protests continue, while reports suggest the US and China remain far apart.  Even Brexit has likely been given only a three month reprieve.  We remain negative on EM until these key issues have been ultimately resolved. 
China reports August money and loan data this week but no data has been set.  With the recently announced cuts in reserve requirements, money and loan growth should start to pick up in September.  August CPI and PPI will be reported Tuesday, with the former expected to rise 2.6% y/y and the latter expected to fall -0.9% y/y.  For now, the PBOC is focused on growth, not inflation.
Taiwan reports August trade Monday.

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Latest Thoughts on the US Economic Outlook

15 days ago

The US economy is starting to show cracks from the ongoing trade war. While we do not want to make too much from one data point, we acknowledge that headwinds are building whilst US recession risks are rising.
RECENT DEVELOPMENTS
US ISM manufacturing PMI fell to 49.1 vs. 51.3 expected. This is the first sub-50 reading since August 2016 and the lowest since January 2016. The employment component fell to 47.4 from 51.7 in July, while new orders fell to 47.2 from 50.8 in July. The only spin we can put on this PMI reading is that manufacturing makes up only 12% of the total US economy.  But make no mistake, this is a bad sign. ISM non-manufacturing PMI will be reported Thursday and is expected at 54.0 vs. 53.7 in July.
The next round of US tariffs on Chinese goods

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Drivers for the Week Ahead

17 days ago

We remain dollar bulls; this is an important data week for the US
Final August eurozone manufacturing PMIs will be reported Monday; UK reports August PMIs this week
RBA meets Tuesday and is expected to keep rates steady at 1.0%; BOC meets Wednesday and is expected to keep rates steady at 1.75%
Swedish Riksbank meets Thursday and is expected to keep rates steady at -0.25%; in EM, the central banks of Chile and Russia meet
Market sentiment rallied last week on a lot of unsubstantiated claims by President Trump regarding trade talks. At best, we know there is no further escalation (for now). At worst, the two sides in reality remain far apart and a deal is unlikely until 2020. That’s no reason to load up on risk or EM. As long as current and planned tariffs are in

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Emerging Markets: FX Model for Q3 2019

22 days ago

The broad-based dollar rally remains intact despite the market’s overly dovish take on the Fed
We still believe markets are vastly overestimating the Fed’s capacity to ease in 2019 and 2020
What’s clear is that the liquidity story is not enough to sustain EM
MSCI EM FX is on track to test the September 2018 low near 1575 and then the April 2017 low near 1568
Our 1-rated (strongest fundamentals) grouping for Q3 2019 consists of TWD, PHP, CNY, THB, and KRW
Our 5-rated (weakest fundamentals) grouping for Q3 2019 consists of COP, ZAR, TRY, RON, and PKR
EM FX OUTLOOK
The broad-based dollar rally remains intact despite the market’s overly dovish take on the Fed.

Emerging Markets FX Q3 2019 – Click to enlarge
Developments elsewhere support our view that other

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Dollar Firm as Markets Calm

23 days ago

– Click to enlarge
Market sentiment has improved after President Trump said China has asked to restart trade talks
PBOC fixed the yuan basically flat and firmer than what models suggested
The G-7 summit wraps up today with little to show for it
We believe the Chicago Fed National Activity Index remains the best indicator to gauge US recession risks
Germany July IFO business climate came in weaker than expected
The lira experienced a flash crash against the yen in early Tokyo trading; Brazil reports July current account and FDI data
The dollar is broadly firmer against the majors as some semblance of calm returns to the markets. Aussie and Loonie are outperforming, while the Scandies are underperforming. EM currencies are broadly weaker. MXN and THB are

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DM Equity Allocation Model For Q3 2019

25 days ago

We recently introduced our Developed Markets (DM) Equity Allocation model. Building on the success of our EM model, this new framework extends our analysis to cover 24 DM equity markets. Our analysis is meant to assist global equity investors in assessing relative sovereign risk and optimal asset allocation across countries within the DM universe.
DM EQUITY OUTLOOK
Global equity markets have come under pressure in recent weeks as the US-China trade war intensified. Given the latest flare-up, we do not expect a trade deal until 2020 at the earliest. We remain very concerned about the global headwinds and do not believe that the liquidity story is enough to offset the downside risks to growth.
Market expectations for aggressive Fed easing have helped support global

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Dollar Firm Ahead of Jackson Hole

28 days ago

FOMC minutes were not as dovish as many had hoped; bond and equity markets are set up for a big reset
Today sees the start of the annual Fed symposium in Jackson Hole; the US reports a slew of data
Markit flash eurozone August PMI readings were reported; ECB publishes the account of its July 25 meeting
Japan-Korea relations continue to deteriorate 
Indonesia delivered a dovish surprise; Mexico and Brazil report mid-August inflation data

The dollar is broadly firmer against the majors ahead of the Fed’s Jackson Hole Symposium.  The yen and Loonie are outperforming, while Stockie and Kiwi are underperforming.  EM currencies are mostly weaker.  IDR and RUB are outperforming, while TRY and PLN are underperforming.  MSCI Asia Pacific was down 0.3%, with the Nikkei

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Emerging Markets: Preview of the Week Ahead

September 17, 2018

Stock Markets
EM FX ended mixed in Friday, capping off an up and down week.  RUB and TRY initially firmed on their respective rate hikes but gave back some of those gains heading into the weekend. Trade tensions are likely to remain high, as press reports suggest President Trump is pushing ahead with tariffs on $200 bln of Chinese imports even as high-level talks are planned. With US rates pushing higher, we think the backdrop for EM remains negative.

Stock Markets Emerging Markets, September 12 – Click to enlarge

Singapore
Singapore reports August trade Monday. Non-oil Domestic Exports (NODX) are expected to rise 5.3% y/y vs. 11.8% in July. The economy remains somewhat sluggish, while CPI rose only 0.6% y/y

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Emerging Markets: What has Changed

September 10, 2018

Summary
Philippine central bank signaled another big hike.
Poland central bank appears to be moving its forward guidance out further.
Russia officials are sending confusing signals regarding monetary policy.
Russia officials stand ready to support the ruble debt market if new US sanctions negatively impact it.
South Africa’s African National Congress pledged to undertake land reform responsibly.
Moody’s cut its 2018 growth forecast for South Africa to 0.7-1.0% from 1.5% previously.
Central Bank of Turkey signaled it will hike rates at the September 13 meeting.
Argentina announced a new export tax to help narrow the budget deficit.
Brazil presidential candidate Jair Bolsonaro was seriously wounded at a campaign

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Emerging Market Week Ahead Preview

September 4, 2018

Stock Markets
EM FX ended last week on a firm note, but weakness resumed Monday. Higher than expected Turkish inflation hurt the lira, which in turn dragged down BRL, ARS, ZAR, and RUB. We expect EM to remain under pressure this week when the US returns from holiday Tuesday. 

Stock Markets Emerging Markets, August 29 – Click to enlarge

Korea
Korea reports August CPI Tuesday, which is expected to rise 1.4% y/y vs. 1.5% in July. If so, inflation would remain well below the 2% target.  BOK just left rates steady at 1.5% on Friday. Next policy meeting is October 18, and no change is expected then. It reports July current account data Thursday.
South Africa
South Africa reports Q2 GDP Tuesday, which is expected

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Emerging Markets: What Changed

September 3, 2018

Summary
China stepped up efforts to attract more foreign inflows to the onshore bond market.
Russia has softened its unpopular pension reform proposal.
The African National Congress withdrew an existing land expropriation bill.
Moody’s downgraded twenty Turkish financial institutions.
Turkey central bank Deputy Governor Erkan Kilimci has reportedly resigned.
Moody’s moved the outlook on Egypt’s B3 rating from stable to positive.
Argentina President Macri asked the IMF to accelerate disbursement of its $50 bln credit line.
Argentine central bank hiked rates 15 percentage points to 60% and pledged not to cut until December.
Brazil central bank offered the first new auction of FX swaps since June 22.
US President Trump

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Emerging Markets: Week Ahead Preview

August 27, 2018

Stock Markets
EM FX was whipsawed last week but ended on a firm note. We look past the noise and believe that the true signals for EM remain higher US interest rates and continued trade tensions, both of which are negative. Turkish markets reopen after a week off. Nothing fundamentally has changed there, and so it still poses some spillover risk to wider EM.

Stock Markets Emerging Markets, August 22 – Click to enlarge

Mexico
Mexico reports July trade Monday, which is expected at -$1.7 bln. Banco de Mexico releases its quarterly inflation report Wednesday. Inflation was a higher than expected 4.81% y/y in mid-August, still above the 2-4% target range. Next policy meeting is October 4, and much will depend on

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Emerging Markets: Preview of the Week Ahead

August 20, 2018

Stock Markets
EM FX stabilized last week as the situation in Turkey calmed somewhat. Reports Friday that the US and China are hoping to resolve the trade dispute also helped EM FX ahead of the weekend. However, TRY remains vulnerable as the US threatens more sanctions due to the pastor. Both S&P and Moody’s downgraded it ahead of the weekend and our own ratings model points to further downgrades ahead. Turkish markets are closed this week for holiday.

Stock Markets Emerging Markets, August 15 – Click to enlarge

Thailand
Thailand reports Q2 GDP Monday, which is expected to grow 4.4% y/y vs. 4.8% in Q1. CPI rose 1.5% y/y in July, which is still in the bottom half of the 1-4% target range. The Bank of Thailand

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Emerging Markets: Preview of the Week Ahead

August 13, 2018

Stock Markets
EM FX came under greater pressure last week as the situation in Turkey deteriorated.  With no weekend developments as of this writing, we expect Turkish assets to remain under pressure this week. Five worst EM currencies YTD are TRY (-41%), ARS (-36%), RUB (-15%), BRL (-14.5%), and ZAR (-12%). All five have serious baggage that warrants continued underperformance.Yet it’s worth noting that the five best are MXN (+4%), COP (+1.5%), MYR (-1%), PEN (-1.5%), and THB (-2%). Yes, we are in a broad-based EM bear market but investors are not selling indiscriminately.

Stock Markets Emerging Markets, August 08 – Click to enlarge

China
China reports July retail sales and IP will be reported Tuesday. IP is

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Emerging Markets: Preview of the Week Ahead

August 6, 2018

Stock Markets
EM FX has come under pressure again due to ongoing trade tensions and rising US rates but saw some modest relief Friday after the PBOC announcement on FX forwards. This helped EM FX stabilize, but we do not think the negative fundamental backdrop has changed. Best performers last week were MXN, PHP, and PEN while the worst were TRY, ZAR, and KRW.

Stock Markets Emerging Markets, August 01 – Click to enlarge

Czech Republic
The Czech Republic reports June industrial and construction output and retail sales Monday. June trade will be reported Tuesday. It then reports July CPI Thursday, which is expected to rise 2.3% y/y vs. 2.6% in June. If so, it would move inflation back towards the 2% target.

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Emerging Markets: Week Ahead Preview

July 30, 2018

Stock Markets
EM FX enjoyed a respite from the ongoing selling pressures, with most currencies up on the week vs. the dollar. Best performers were CLP, MXN, and ZAR while the worst were TRY, CNY, and COP.  BOJ, Fed, and BOE meetings this week may pose some risks to EM FX.

Stock Markets Emerging Markets, July 25 – Click to enlarge

South Africa
South Africa reports June money, loan, and budget data Monday. June trade and Q2 unemployment will be reported Tuesday. SARB just turned more hawkish, saying it would act if inflation “significantly exceeds” 4.5%. CPI rose 4.6% y/y in June and July data is due out August 22. Next policy meetings are September 20 and November 22 and decisions will clearly be

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Emerging Markets: Week Ahead Preview

July 23, 2018

Stock Markets
EM FX saw some violent swings last week, due in large part to some unhelpful official comments Friday. BRL and TRY were the best performers last week, while RUB and CLP were the worst. When all is said and done, however, we think Fed policy remains unaffected and so we remain negative on EM FX. Also, global trade tensions remain high after Trump threatened tariffs on all Chinese imports entering the US.

Stock Markets Emerging Markets, July 18 – Click to enlarge

Korea
Korea reports trade data for the first 20 days of July on Monday. It reports Q2 GDP Thursday, which is expected to grow 2.9% y/y vs. 2.8% in Q1. The economy remains sluggish and faces headwinds from global trade tensions. Next BOK

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Emerging Market Preview: Week Ahead

July 3, 2018

Stock Markets
EM FX ended Friday mixed, capping off a mostly softer week. TRY, MXN, and RUB were the top performers and the only ones up against USD, while ARS, CLP, and BRL were the worst.  Looking ahead, US jobs data on Friday pose some risks to EM, coming on the heels of a higher than expected 2% y/y rise in PCE. China will also remain on the market’s radar screen, with the first snapshots of June economic activity just starting to emerge. We remain negative on EM FX.

Stock Markets Emerging Markets, June 27 – Click to enlarge

Mexico
Mexico reports June PMI Monday. Banco de Mexico releases its minutes Thursday. At that meeting, it hiked rates 25 bp ahead of the election. If markets react badly to the

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Emerging Markets: What Changed

July 2, 2018

Summary
PBOC fixed USD/CNY at the highest level since December 14.
Bank Indonesia delivered a larger than expected 50 bp to 5.25%.
Bulgarian Prime Minister Boyko Borissov survived a second no-confidence vote this year.
Turkish President Recep Tayyip Erdogan was re-elected but with sweeping new powers.
Saudi Arabia, Kuwait, and UAE are reportedly in talks to help stabilize Bahrain.
The South African Reserve Bank basically ruled out further easing.
Brazil government cut the inflation target to 3.75% +/- 1.5 percentage point for 2021.
Stock Markets
In the EM equity space as measured by MSCI, Mexico (+3.8), Colombia (+2.9%), and the Russia (+2.3%) have outperformed this week, while China (-3.5%), Chile (-2.9%), and

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Emerging Markets: Preview of the Week Ahead

June 26, 2018

Stock Markets
EM FX ended Friday mixed, and capped off a mixed week overall as the dollar’s broad-based rally was sidetracked. EM may start the week on an upbeat after PBOC cut reserve requirements over the weekend. Best EM performers last week were ARS, MXN, and TRY while the worst were THB, IDR, and BRL.

Stock Markets Emerging Markets, June 20 – Click to enlarge

Indonesia
Indonesia reports May trade Monday. Exports are expected to rise 6% y/y and imports by 12% y/y. Bank Indonesia meets Thursday and is expected to hike rates 25 bp to 5.0%. Though inflation remains low, the bank has hiked twice already to help support the rupiah.
Singapore
Singapore reports May CPI Monday, which is expected to rise 0.3% y/y

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Emerging Markets: What Changed

June 25, 2018

Summary
Nor Shamsiah Mohd Yunus was named the new Governor of Malaysia’s central bank.
Moody’s cut the outlook on Pakistan’s B3 rating to negative from stable.
National Bank of Hungary tiled more hawkish.
Israeli Prime Minister Benjamin Netanyahu’s wife was charged with misusing public funds.
MSCI added Saudi Arabia and Argentina to its Emerging Markets index
Brazil’s government its split on the inflation target for 2021.
Ivan Duque will be the next president of Colombia.
Stock Markets
In the EM equity space as measured by MSCI, Mexico (+2.4), Turkey (+1.7%), and Russia (+1.5%) have outperformed this week, while the Philippines (-6.6%), UAE (-4.3%), and Thailand (-3.9%) have underperformed. To put this in better

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Emerging Markets: Week Ahead Preview

June 19, 2018

Stock Markets
EM FX was mixed on Friday but capped off a largely losing week. MYR, CLP, and CNY were the best performers over the last week, while ARS, TRY, and ZAR were the worst. We expect EM FX to continue weakening, but note that with very few fundamental drivers this week, we may see some consolidation near-term.

Stock Markets Emerging Markets, June 13 – Click to enlarge

Singapore
Singapore reports May trade Monday, with NODX expected to rise 4.6% y/y vs. 11.8% in April. Retail sales came in much weaker than expected for April, with headline rising 0.4% y/y and ex-autos 0.7% y/y. The October MAS policy meeting is still a few months away, but recent softness in the economy supports our view that it will

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Emerging Markets: What Changed

June 18, 2018

Summary
US-China trade tensions are rising.
Pakistan devalued the rupee for a third time since December.
Bulgaria will seek to join the eurozone banking union and ERM-2 simultaneously.
The National Bank of Hungary appears to have tilted more hawkish.
Newly elected Egyptian President El-Sisi shuffled his cabinet.
Argentina has a new central bank chief after Federico Sturzenegger resigned.
Chile central bank signaled that the policy rate is likely to rise before year-end.
Stock Markets
In the EM equity space as measured by MSCI, Mexico (+0.9), India (+0.6%), and UAE (+0.3%) have outperformed this week, while Peru (-3.8%), Brazil (-3.6%), and Philippines (-3.0%) have underperformed. To put this in better context, MSCI

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Emerging Markets: Preview of the Week Ahead

June 12, 2018

Stock Markets
EM FX ended Friday on a mixed note, capping off a roller coaster week for some of the more vulnerable currencies. We expect continued efforts by EM policymakers to inject some stability into the markets. However, we believe the underlying dollar rally remains intact. Central bank meetings in the US, eurozone, and Japan this week are likely to drive home that point.

Stock Markets Emerging Markets, June 6 Source: economist.com – Click to enlarge

China
China reports May money and new loan data this week, but no date has been set. It reports May retail sales and IP Thursday. The former is expected to rise 9.6% y/y while the latter is expected to rise 7.0% y/y. Overall, markets remain comfortable with

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Emerging Markets: What Changed

June 11, 2018

Summary
The Reserve Bank of India hiked rates for the first time since 2014.
Malaysia’s central bank governor resigned.
Czech central bank tilted more hawkish.
Russia central bank tilted more dovish.
Argentina got a $50 bln standby program from the IMF.
Brazil central bank signaled more aggressive FX intervention ahead.
Mexico trade tensions with US are rising.
Peru has a new Finance Minister.
Stock Markets
In the EM equity space as measured by MSCI, Qatar (+4.6), UAE (+3.5%), and Poland (+2.7%) have outperformed this week, while Brazil (-5.4%), Turkey (-2.6%), and Russia (-2.0%) have underperformed. To put this in better context, MSCI EM rose 0.5% this week while MSCI DM rose 1.2%.
In the EM local currency bond

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Emerging Markets: Preview of the Week Ahead

June 5, 2018

Stock Markets
EM FX put in a mixed performance Friday, and capped off an overall mixed week. Over that week, the best performers were IDR, TRY, and INR while the worst were BRL, MXN, and ARS. US yields are recovering and likely to put renewed pressure on EM FX.

Stock Markets Emerging Markets, May 30 Source: economist.com – Click to enlarge

Indonesia
Indonesia reports May CPI Monday, which is expected to rise 3.3% y/y vs. 3.4% in April. If so, it would remain near the bottom of the 3-5% target range. However, we think the weak rupiah will keep Bank Indonesia in tightening mode. Next policy meeting is June 28, and another 25 bp hike is likely.
Turkey
Turkey reports May CPI Monday, which is expected to rise

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Emerging Market Preview: Week Ahead

June 1, 2018

Stock Markets
EM FX has started the week mixed. Some relief was seen as US rates stalled out last week, but this Friday’s jobs number could be key for the next leg of this dollar rally. On Wednesday, the Fed releases its Beige book for the upcoming June 13 FOMC meeting, where a 25 bp hike is widely expected. We believe EM FX remains vulnerable to further losses.

Stock Markets Emerging Markets, May 23 Source: economist.com – Click to enlarge

Brazil
Brazil reports April central government budget data Tuesday, where a BRL3 bln primary surplus is expected. Consolidated budget data will be reported Wednesday, along with Q1 GDP. Growth is expected to slow to 0.9% y/y from 2.1% in Q4. The decision to freeze diesel

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