What Has Changed in EM

  • India-Pakistan tensions are rising
  • Poland central bank is tilting even more dovish.
  • Israel opposition is uniting against Prime Minister Benjamin Netanyahu
  • Nigeria delayed its elections by one week to this Saturday
  • South Africa Finance Minister Mboweni painted a grim fiscal picture
  • Argentina President Mauricio Macri official announced he will seek re-election for a second term this October
  • Brazil President Jair Bolsonaro personally delivered his pension reform proposal to Congress
  • Banco de Mexico took the unprecedented step of correcting its meeting minutes Continue reading “What Has Changed in EM”

Brazil Optimism Overdone, Reality Check Overdue

Brazil optimism is taking a hit as markets reassess political risk. President Bolsonaro fired Secretary-General Bebianno over allegations their PSL party misused campaign funds in last fall’s elections. The timing is bad as it comes just as the government submitted its pension reform bill to Congress, where reports suggest growing pushback from lawmakers against the reforms.       Continue reading “Brazil Optimism Overdone, Reality Check Overdue”

Rand Weakness to Resume After South African Budget

South Africa’s budget statement delivered bad news on all fronts today. We see downgrades ahead, including the loss of investment grade from Moody’s. On the other hand, lower than expected inflation may tempt the SARB into tilting more dovish, which would also be negative for the rand. Continue reading “Rand Weakness to Resume After South African Budget”

Russia Outlook Solid but Sanctions Risk Looms

Russia was just upgraded by Moody’s to investment grade. While we have been negative on Russia, the upgrade shows just how resilient the economy has been. Yet the recent arrest of Michael Calvey has sent a chill through the investment community. Furthermore, the US Senate is also moving forward with another round of sanctions. Continue reading “Russia Outlook Solid but Sanctions Risk Looms”

EM Preview for the Week Ahead

Since their post-FOMC peak on January 31, both MSCI EM and MSCI EM FX have fallen. Virtually every EM currency has given up their post-FOMC gains, the lone exception being MYR (+0.2%). The worst performers have been ZAR (-6%), ARS (-3.3%), and TRY (-2.3%). This supports our belief that the liquidity and low US rates story is not enough to sustain the EM rally on its own. What’s still missing is an improved global outlook and we certainly didn’t get that with the US retail sales data. Continue reading “EM Preview for the Week Ahead”

Thai Politics Get Even Messier

Elections will be held in Thailand on March 24. These will be the first since the 2014 coup brought a military junta to power. The country remains deeply divided, with the recent candidacy and quick disqualification of Princess Ubolratana further muddying the waters.

Continue reading “Thai Politics Get Even Messier”

EM Preview for the Week Ahead

EM FX ended the week mixed but gave up much of their post-FOMC gains as the week progressed. MYR, PHP, and MXN were the best EM performers for the week and posted small gains. ZAR, BRL, and ARS were the worst in EM, dropping nearly 2% against USD. US-China trade talks and Chinese data are likely to set the tone for EM this week. Reports that the US government may shut down again should weigh on risk assets.

Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Reserve Bank of India delivered a dovish surprise
  • Thai Princess Ubolratana announced she is running for Prime Minister
  • EU President Donald Tusk may return to Polish politics
  • South Africa President Cyril Ramaphosa unveiled plans to boost the economy and create jobs
  • Euphoria over Brazil’s prospects has faded a bit
  • Banco de Mexico delivered a dovish hold

Continue reading “What Has Changed in EM”

DM Sovereign Rating Model For Q1 2019

We have produced this ratings model to assist investors in assessing relative sovereign risk over a wide range of Developed Markets (DM), 33 in all. We have decided to adhere to MSCI methodology and have moved Hong Kong, Israel, and Singapore from EM to DM.

Continue reading “DM Sovereign Rating Model For Q1 2019”