Drivers for the Week Ahead

  • The dollar continues to climb
  • FOMC minutes will be released Wednesday; this week also sees the annual Fed symposium in Jackson Hole
  • US data this week is minor; the picture painted last week by the US data is a good one
  • Markit flash eurozone August PMI readings and ECB account of its July 25 meeting will be released Thursday
  • Key Asian trade data will be seen this week; Bank Indonesia meets Thursday and is expected to keep rates steady at 5.75% Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM is likely to remain under pressure.  Despite some signs of a slight thaw in US-China relations, a trade deal remains far off and so global growth and trade are likely to see continued downside risks.  Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • China said it will impose retaliatory measures on the US
  • Bank of Israel may change its FX program by eliminating its sterilization
  • Argentina central bank changed FX rules for commercial banks that will lead to some forced dollar selling
  • Argentina President Macri is lurching left in response to his huge primary loss
  • Brazil central bank tweaked its FX program
  • Banco de Mexico delivered a dovish surprise and cut rates 25 bp to 8.0% Continue reading “What Has Changed in EM”

Some Thoughts on Hong Kong

Political tensions in Hong Kong are nearing a boiling point. If mainland China police forces go into Hong Kong, then all bets are off. That is not our base case and so our investment outlook hinges on some sort of negotiated political settlement occurring. Continue reading “Some Thoughts on Hong Kong”

Argentina Elections Unlikely to Change Downward Trajectory

Some Thoughts on the Argentine Election

The weekend primary vote in Argentina suggests opposition candidate Fernandez will easily win the presidential vote October 27. Uncertainty in the runup to the vote should keep Argentina under pressure, but we think Fernandez may not be as bad as markets fear. We also downplay contagion risks, as Argentina is too small and isolated to have much impact. Continue reading “Some Thoughts on the Argentine Election”

Drivers for the Week Ahead

  • US has an important data week; the US economy remains in solid shape
  • US-China relations remain strained; China reports July new loan and money supply data this week
  • Eurozone reports some key data this week; UK has a heavy data week
  • Norges Bank meets Thursday and is expected to keep rates steady at 1.25%
  • The only EM central bank to meet this week is Banco de Mexico Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM is likely to remain under pressure as US -China relations remain strained.  Despite his claims that things are going “very well”, President Trump admitted that the September talks might be cancelled.  This is very negative for EM, which saw some stability towards the end of last week. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Reserve Bank of India surprised markets with a 35 bp cut to 5.4%
  • Philippines central bank cut rates 25 bp to 4.25%, as expected
  • Bank of Thailand surprised markets with a 25 bp cut to 1.5%
  • Turkey central bank fired several high-ranking officials
  • Brazil pension reforms were passed by the Lower House by a vote of 370-124
  • Peru’s central bank joined the ranks of the easing and cut rates 25 bp to 2.5% Continue reading “What Has Changed in EM”

EM Equity Allocation Model For Q3 2019

  • EM has come under pressure again, helped by yet another flare-up in US-China trade tensions and a less dovish than expected Fed
  • MSCI EM has since given up nearly three quarters of this year’s gains
  • MSCI EM FX has fared even worse, giving up nearly all this year’s gains
  • Our 1-rated grouping (outperformers) for Q3 2019 consists of China, Korea, UAE, Hungary, and Poland
  • Our 5-rated grouping (underperformers) for Q3 2019 consists of South Africa, Egypt, Brazil, Pakistan, and Argentina
  • Since our last model update on March 7, our proprietary EM equity portfolio is -6.5%, outperforming MSCI EM (-7.0%) Continue reading “EM Equity Allocation Model For Q3 2019”