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”

EM Preview for the Week Ahead

The dollar was firmer against the majors but softer against EM FX last week. This divergence is unlikely to last. Which is giving the true signal? We believe the broad-based dollar rally remains intact due to our constructive view on the US economy. As such, we expect EM FX to resume weakening in the coming days. Continue reading “EM Preview for the Week Ahead”

What Has Changed in EM

  • Philippine central bank sounded a cautious note
  • Moody’s has given South Africa a reprieve
  • Argentina central bank said it won’t allow the LELIQ rate to drop below 62.5% this month
  • Chile central bank cut its 2019 growth and inflation forecasts Continue reading “What Has Changed in EM”

Uridashi Issuance in Q1 2019

So far this year, foreign currency Uridashi issuance has totaled $2.5 bln. Annualized, it amounts to $10 bln and would represent a slight increase from $8.9 bln in 2018 and $8.4 bln in 2017. However, it would fall short of the $11.8 bln issued in 2016. Continue reading “Uridashi Issuance in Q1 2019”

India’s Post-Election Outlook Remains Solid

The Reserve Bank of India meets Thursday and is widely expected to cut rates 25 bp. With Modi seen as likely to win a second term in the upcoming election, investors are likely to turn more positive on Indian assets. Continue reading “India’s Post-Election Outlook Remains Solid”

EM Preview for the Week Ahead

EM FX saw broad-based weakness last week. The only exceptions were TRY (+3.5%) and CNY (+0.1%). The former’s gains were driven in large part by official efforts to stabilize it ahead of Turkish local elections this weekend. These gains are artificial and not sustainable, in our view. The global backdrop remains challenging for EM, as global growth concerns appear to be taking precedent over the favorable liquidity story. Continue reading “EM Preview for the Week Ahead”

EM Preview for the Week Ahead

EM got hit hard last week by risk-off sentiment that picked up in the wake of the FOMC meeting. Like the recent ECB decision, markets are rightfully focusing on the global growth implications of the dovish central banks rather than the liquidity implications. The US yield curve briefly inverted last week. If sustained, it would signal a likely US recession in the next 6-24 months. This is hardly conducive to risk and EM assets, which we see remaining under pressure this week. Continue reading “EM Preview for the Week Ahead”

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”