Emerging Market Risk Map

With year-end upon us, we review some of the key risks to EM assets and how we think they progress from here. In short, the two most significant downside risks would be a decisive improvement in Elizabeth Warren’s polling figures and an upset in the US-China trade negotiations. Continue reading “Emerging Market Risk Map”

Persistent Social Unrest to Weigh on Chilean Assets

Social unrest in Chile has gotten worse despite President Pinera’s administration making many concessions to the protestors. The agreement to rewrite the constitution has unnerved investors and fanned fears that the government will swing too far to the populist left to quell the protests. Prolonged political and economic uncertainty should continue to weigh on Chilean assets. However, we downplay risks of capital controls for now. Continue reading “Persistent Social Unrest to Weigh on Chilean Assets”

EM Preview for the Week Ahead

EM was mostly lower last week, as doubts crept in about the recent trade optimism.  Some events also served as reminders of idiosyncratic EM risk that can’t be overlooked, such as downgrade risks (South Africa), failed oil auctions (Brazil), and violent protests (CLP).  EM may remain on its back foot until we get further clarity on the US-China talks, but we remain confident in our call that a deal will be struck soon that lower existing tariffs.  Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM should continue to benefit from the generalized improvement in the global backdrop.  Trade tensions have eased whilst the risks of a hard Brexit have fallen, at least for now.  Yet recent developments in some major EM countries underscores how important it is for investors to differentiate between the strong credits and the weak ones.  For instance, South Africa, Hong Kong, Argentina, and Chile all come with idiosyncratic risks.  Continue reading “EM Preview for the Week Ahead”

Mexico vs. Brazil Near-Term Outlook

Both Brazil and Mexico are in a good position to benefit from the current improvement in market sentiment. However, when comparing the factors driving the currencies of both countries, we think there are relatively more near-term positives for the Mexican peso than for the Brazilian real. Continue reading “Mexico vs. Brazil Near-Term Outlook”

Drivers for the Week Ahead

  • This will be one of the more eventful weeks for global markets
  • The FOMC decision Wednesday will be the highlight of the week
  • The US has a full data week, concluding with the October jobs report Friday
  • Brexit is the other big unknown this week Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM has been on a good run but this week will be a big test.  Brexit uncertainty may finally end.  Or it may not.  A delay would be positive for EM, whilst a potential hard Brexit would be negative.  The Fed meets Wednesday and key US data will be reported during the week, culminating with the jobs report Friday.  The dollar has been on its back foot as September data have come in weaker than expected, so any sort of positive data surprises this week could add to the dollar’s recent gains.  Continue reading “EM Preview for the Week Ahead”

A New Stage of the US-China Conflict

The US-China diplomatic relationship may be entering a new stage. The balance of power between the key players – Trump, China, the US Congress, and the Democrats – is changing and their roles are being reshuffled. This might be enough to break the endless cycle of agreements and re-escalations. In short, we think both Trump and Chinese officials have a greater incentive to reach a deal (or at least not to escalate) this time around. Continue reading “A New Stage of the US-China Conflict”

Drivers for the Week Ahead

  • We are beginning to become more constructive on EM
  • The Brexit situation remains fluid but it appears that our base case of another delay is coming to fruition
  • The US economic outlook still remains solid; Canada holds national elections Monday
  • ECB, Norges Bank, and Riksbank meet Thursday and are expected to stand pat: Turkey meets Thursday and is expected to cut rates
  • Bank Indonesia meets Thursday and is expected to cut rates 25 bp to 5.0% Continue reading “Drivers for the Week Ahead”