What Has Changed in EM

  • Malaysian bonds may be dropped from FTSE Russell’s World Government Bond Index (WGBI) due to liquidity concerns
  • Pakistan Finance Minister Asad Umar has resigned from the Cabinet
  • Poland continues to overhaul its pension system
  • The Bank of Israel said it is considering FX intervention if the shekel continues to appreciate
  • Egypt’s parliament overwhelmingly approved a constitutional amendment that would allow President El-Sisi to remain in office through 2030
  • Press reports suggest that Turkey’s central bank reserves are much lower than reported
  • Argentina central bank President Sandleris said it would hold its currency band at current levels until the end of the year
  • Brazil pension reforms look likely to be bogged down in Congress Continue reading “What Has Changed in EM”

Reinforcing Our Bullish Dollar Call

Every now and then, it’s helpful to reassess what’s changed in the global economy and whether it warrants any changes to our broad macro calls. Given what we see as continued economic and monetary policy divergence, we are maintaining our strong dollar call. Continue reading “Reinforcing Our Bullish Dollar Call”

EM FX Model For Q2 2019

  • The broad-based dollar rally stalled out in Q1 following the more dovish market take on the Fed
  • However, the dollar has been getting some more traction of late as US rates rise
  • Developments elsewhere are also dollar-supportive
  • We believe markets are vastly overestimating the Fed’s capacity to ease in 2019
  • Our 1-rated (strongest fundamentals) grouping for Q2 2019 consists of CNY, TWD, THB, KRW, and RUB
  • Our 5-rated (weakest fundamentals) grouping for Q2 2019 consists of ARS, ZAR, TRY, RON, and PKR

Continue reading “EM FX Model For Q2 2019”

Indonesia Outlook Remains Solid After Elections This Week

Indonesia goes to the polls Wednesday. President Joko Widodo is widely expected to win a second term. Political continuity and solid economic fundamentals should help Indonesian assets outperform this year. Continue reading “Indonesia Outlook Remains Solid After Elections This Week”

EM Preview for the Week Ahead

EM FX is coming off a good week, capitalizing on broad-based dollar weakness. Better than expected data out of China helped boost market sentiment too. Key US and China data will come out this week and should help determine the short-term outlook for the dollar. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Philippines central bank said it will cut rates soon due to falling inflation
  • MAS cut its core inflation forecast for this year to 1-2% from 1.5-2.5% previously
  • Turkey’s government announced it will inject fresh capital into state-owned banks
  • Now that the election has passed, Turkey’s central bank is normalizing monetary policy
  • Benjamin Netanyahu and his Likud party appear to have won the Israeli elections.
  • Argentina’s government will reportedly freeze prices on some food items for six months
  • President Bolsonaro reportedly ordered Petrobras to cancel a planned increase in diesel fuel prices for “the greater good.”
  • Brazil pension reform looks more and more likely to be delayed
  • Ecuador expelled fugitive Julian Assange from its London embassy Continue reading “What Has Changed in EM”

DM Sovereign Rating Model For Q2 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 Q2 2019”

DM Equity Allocation Model For Q2 2019

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. Continue reading “DM Equity Allocation Model For Q2 2019”

Argentine Assets to Underperform as October Elections Approach

The IMF just approved a $10.8 bln tranche of aid to Argentina Friday, yet the peso continues to weaken to record levels. The economic backdrop is worsening even as political risk rises ahead of October elections, and so we believe Argentine assets are likely to continue underperforming this year. Continue reading “Argentine Assets to Underperform as October Elections Approach”