EM Preview for the Week Ahead

Global growth concerns are likely to keep EM on its back foot. China and the eurozone reported weak economic data Friday, and even a much stronger than expected US retail sales report was not enough to turn market sentiment.

Singapore reports November trade Monday, with NODX expected to rise 1.8% y/y vs. 8.3% in October. Regional trade has slowed in recent months due to a variety of factors. These are expected to persist into 2019 and so the regional central banks are likely to take a cautious stance towards potential tightening. We expect the MAS to leave policy unchanged at its next policy meeting in April.

Indonesia reports November trade Monday, with exports expected to rise 4.7% y/y and imports by 11% y/y. Bank Indonesia meets Thursday and is expected to keep rates unchanged at 6.0%. CPI rose 3.2% y/y in November, the highest since May but still below the 3.5% target.

Turkey report October IP Monday, which is expected to contract -3.6% y/y vs. -2.7% in September. The central bank just kept rates steady as the economy remains at risk of deeper recession. While it said policy would be kept tight for a while yet, markets remain concerned that the economic downturn will lead Erdogan to pressure the bank to cut rates sooner rather than later.

National Bank of Hungary meets Tuesday and is expected to keep policy broadly unchanged. CPI rose 3.1% y/y in November, just above the target but the lowest since June. With the eurozone slowing, we think the central bank will retain its dovish stance.

Malaysia reports November CPI Wednesday, which is expected to rise 0.4% y/y vs. 0.6% in October. While Bank Negara does not have an explicit inflation target, low price pressures should allow it to remain on hold through much of next year.

Bank of Thailand meets Wednesday and is expected to hike rates 25 bp to 1.75%. However, the market is split. Of the 11 analysts polled by Bloomberg, 3 see no change and 8 see at 25 bp hike. CPI rose 0.9% y/y in November, below the 1-4% target range and the lowest since March. As such, we see risks of a dovish surprise.

Poland reports November industrial and construction output and PPI Wednesday. All are expected to slow modestly from October. Central bank minutes will be released Thursday. November real retail sales will be reported Friday and are expected to rise 6.5% y/y vs. 7.8% in October.

Taiwan central bank meets Thursday and is expected to keep rates unchanged at 1.375%. CPI rose 0.3% y/y in November, the lowest since October 2017. While the central bank does not have an explicit inflation target, low price pressures should allow it to remain on hold through much of next year. November export orders will also be reported Thursday.

Czech National Bank meets Thursday and is expected to keep rates unchanged at 1.75%. CPI rose 2.0% y/y in November, right at the target but the lowest since April. With the eurozone slowing, we think CNB will be more cautious about tightening too much.

Banco de Mexico meets Thursday and is expected to hike rates 25 bp to 8.25%. Mid-December CPI will be reported Friday. CPI rose 4.72% y/y in November, the lowest since June but still well above the 2-4% target range.

Brazil central bank releases its quarterly inflation report Thursday. Brazil then reports mid-December IPCA inflation and November current account data Friday. IPCA rose 4.1% y/y in November, the lowest since May and in the bottom half of the 3-6% target range. COPOM tilted even more dovish this month and so expectations for the first hike have been pushed out to H2 2019.

Colombia central bank meets Friday and is expected to keep rates unchanged at 4.25%. CPI rose 3.3% y/y in November, slightly above target but still within the 2-4% target range. With oil prices still vulnerable, we believe the central bank will be cautious in starting the tightening cycle.