Tag Archives: emerging markets

EM starts the week under broadbased pressure.  We downplay reports of competitive devaluations under way because of China’s FX moves, however.  Many in EM in experiencing negative terms of trade shocks, and so their currencies are expected to depreciate.  We do not think any policymakers in EM want a weaker currency, as most are fighting to lend support via intervention and other means.   The multi-year EM boom has ended, and valuations across all asset classes are being adjusted.  This...

(from my colleague Dr. Win Thin) Meet the new year - same as the old year.  EM starts 2016 on a weak footing, with negative sentiment carrying over from 2015.  The global backdrop remains poor, with the Fed likely to continue its tightening cycle with another hike in March.  Commodity prices remain near the lows, while China data suggests that the slowdown (albeit modest) continues. Idiosyncratic EM risk remains in play, but in some instances could take a bit of a breather.  Brazil’s...

1) Argentina eliminated capital controls and allowed the peso to float2) Argentina also eliminated export taxes on agricultural goods that include beef, wheat, and corn3) Fitch joined S&P in cutting Brazil to sub-investment grade BB+ with a negative outlook4) Brazil’s Supreme Court ruled that impeachment proceedings can move forward5) Banco de Mexico hiked rates for the first time since 20086) Under strong pressure from the financial markets, South African President Zuma reinstated...

(from my colleague Dr. Win Thin) Today’s Fitch downgrade is a stark reminder that Brazil continues to suffer from a toxic mix of high inflation, recession, low commodity prices, and heightened political uncertainty.  Because we see no end in sight for these negative factors, we believe Brazil assets will continue to underperform.POLITICAL OUTLOOK The impeachment process has begun, but it is not yet clear whether it can gain enough traction to actually topple President Rousseff.  We have...

(from my colleague Dr. Win Thin) EM starts the FOMC week off on a soft footing.  Besides the prospects of Fed liftoff Wednesday, oil prices are making new cycle lows.  Uncertainty about China’s FX policy is also making markets nervous, though we think this concern is misplaced.  Overall, the global backdrop for EM remains very negative and we do not see much chance for a rebound after Fed lift-off is seen.  In recent days, USD has made new all-time highs against COP, MXN, and ZAR. ...

1) South African President Jacob Zuma fired Finance Minister Nene and replaced him with little-known ANZ lawmaker David Van Rooyen  2) S&P revised the outlook on South Africa’s BBB- rating from stable to negative  3) People’s Bank of China announced the publication of a new CNY basket on its website  4) Moody’s put Brazil’s Baa3 rating on review for possible downgrade  5) Brazil’s Supreme Court suspended for a week the creation of the congressional impeachment committee  6) Relations...

(from my colleague Dr. Win Thin) EM starts the week off in the familiar position of coming under pressure.  The strong US jobs report has all but cemented a Fed lift-off this month, helping the dollar to claw back some of its post-ECB losses.  Meanwhile, commodities continue to sink under the prospects of increased supply.  Brent oil in particular is making new cycle lows after last week’s OPEC meeting saw the quota system basically scrapped.  These factors all continue to conspire...

(from my colleague Ilan Solot) 1) The Chinese yuan will be in the SDR.  2) Brazil had one of the most important weeks of the year, and possibly of its history.  3) Russia enacted sanctions against Turkey, while Turkey got a deal from the EU.  4) Moody’s raised Russia’s credit-rating outlook to stable from negative.  In the EM equity space, China (+2.6%), Taiwan (0.0%), and Israel (+0.0%) outperformed over the last week, while Poland (-5.4%), South Africa (-4.6%), and Chile (-3.3%) have...

(from my colleagues Dr. Win Thin and Ilan Solot) This is set to be one of the most important weeks of the year. EM is likely to take a backseat between the ECB monetary policy decision, the OPEC meeting and the US jobs report. That said, there are several potential sources of idiosyncratic risk to key an eye on. There could be more headline risks from the Russia-Turkey situation. Some think that the leader of Brazilian lower house may bring forward the impeachment process this week,...

(from my colleagues Dr. Win Thin and Ilan Solot) EM starts the week on an uncertain footing. Commodity prices were off sharply until comments by Saudi Arabia lifted them, reversing the trend in commodity-sensitive assets. The dollar is also back on the rise, pressuring EM FX even as a December FED hike is now just about fully priced in. In South America, the victory of the market-friendly candidate in Argentina and better political winds in Brazil have also given the region some hope for...