EM Preview for the Week Ahead

EM FX ended a good week on a strong note, with virtually every currency up against the greenback. The FOMC is likely to send a very dovish message to the markets this week. While this should help EM gain, we note that risk assets generally did not do well after the January FOMC and March ECB meetings. We think that global growth concerns will become more of an issue in the coming days. Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM FX came under great pressure last week despite the ECB’s dovish hold. Markets instead focused on the grim eurozone economic outlook, which comes within the context of a broader global slowdown. It’s clear that EM needs more than just the liquidity story, though that may be tested too with the spate of US data releases (retail sales, CPI, and PPI) out this week. We remain negative on EM. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Philippine President Duterte named Budget Secretary Benjamin Diokno as the new central bank Governor
  • US-Turkey relations are souring
  • National Energy Regulator of South Africa allowed state-owned power company Eskom to raise by prices by 9.4% starting April 1
  • Argentina central bank tightened monetary policy by the most since last fall
  • S&P cut its outlook for Mexico’s BBB+ rating from stable to negative Continue reading “What Has Changed in EM”

EM Equity Allocation Model For Q2 2019

  • EM remains vulnerable due to the deteriorating global growth outlook
  • We see an eventual test of that January low near 921
  • Looking further out, charts point to a test of the December 2016 low near 945.50
  • Our 1-rated grouping (outperformers) for Q2 2019 now consists of Hungary, Poland, China, UAE, and Korea
  • Our 5-rated grouping (underperformers) for Q2 2019 now consists of Brazil, Turkey, Argentina, Egypt, and South Africa
  • Since our last model update on October 25, our proprietary EM equity portfolio has risen 9.5%, slightly underperforming MSCI EM (+9.9)

Continue reading “EM Equity Allocation Model For Q2 2019”

EM Sovereign Rating Model For Q2 2019

We have produced the following Emerging Markets (EM) ratings model to assess relative sovereign risk. An EM country’s score directly reflects its creditworthiness and underlying ability to service its external debt obligations. Continue reading “EM Sovereign Rating Model For Q2 2019”

EM Preview for the Week Ahead

EM FX ended the week soft as the dollar continued to claw back recent losses on the back of higher US rates. US jobs data this Friday will be very important to keep the trend of rising US rates going. Meanwhile, low inflation in EM should allow central banks to start contemplating rate cuts, though none are expected to cut anytime soon. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • MSCI will raise the index weight of China A-shares in its EM index
  • Pakistani-India tensions remain high after Pakistan downed two Indian jets in Kashmir
  • The US-North Korea summit in Hanoi ended badly
  • Poland ruling Law and Justice Party announced a big round of fiscal stimulus ahead of the elections
  • Israel Attorney General Mandelblit formally notified Prime Minister Netanyahu that he plans to charge him with bribery, fraud, and breach of trust
  • Nigerian President Buhari was declared the winner of last weekend’s election
  • Argentina central bank will tighten policy
  • Brazil announced the auction date for a group of deep-water oil fields Continue reading “What Has Changed in EM”

EM Preview for the Week Ahead

EM ended the week firm on rising optimism regarding US-China trade. Talks will continue this week ahead of Friday’s deadline. It may be too soon to strike a deal, however, and so we expect a 60-day extension. China provides the first snapshot of February activity with its PMI readings this week, where some stability is seen after recent stimulus measures. Downside risks remain in place, however. Continue reading “EM Preview for the Week Ahead”

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”