EM Preview for the Week Ahead

EM and risk assets should get a near-term boost from the good news coming out of the G20 meeting. Still, we caution against getting too optimistic on EM. Current US tariffs on Chinese goods will remain in place, which will continue to act as a headwind on global growth and trade.

Korea reports June trade data Monday. Exports are expected to contract -13.5% y/y and imports by -9.6% y/y. It then reports June CPI Tuesday, which is expected to rise 0.8% y/y vs. 0.7% in May. If so, inflation would remain well below the 2% target. Next policy meeting is July 17 and no change is expected then. May current account data will be reported Thursday.

Caixin reports China June manufacturing PMI Monday, which is expected at 50.1 vs. 50.2 in May. Official PMI was reported over the weekend at 49.4 vs. 49.5 expected, so there are downside risks to the Caixin reading. Caixin reports June services and composite PMI readings Wednesday. The trade truce stemming from the G20 is welcome, but current tariffs remain in effect and remain a headwind for the economy.

Thailand reports June CPI Monday, which is expected to rise 1.09% y/y vs. 1.15% in May. If so, inflation would remain near the bottom of the 1-4% target range. Next policy meeting is August 7 and no change is expected then.

Indonesia reports June CPI Monday, which is expected to rise 3.20% y/y vs. 3.32% in May. If so, inflation would remain in the bottom half of the 2.5-4.5% target range. Next policy meeting is July 18 and a 25 bp cut to 5.75% seems likely.

Brazil reports June trade data Monday. May IP will be reported Tuesday, which is expected to rise 6.3% y/y vs. -3.9% in April. The economy remains sluggish and so markets are getting increasingly confident that COPOM will start an easing cycle in H2. Next policy meeting is July 31 and no change is expected then.

Turkey reports June CPI Wednesday, which is expected to rise 16.10% y/y vs. 18.71% in May. If so, inflation would be the lowest since June 2018. Next policy meeting is July 25 and some limited easing is possible then.

National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%. CPI rose 2.6% y/y in June, higher than expected and the highest since November 2012. Inflation is now in the top half of the 1.5-3.5% target range, making it harder for the bank to maintain its forward guidance of steady rates through 2021.

Chile reports May retail sales Wednesday, which are expected to rise 1.0% y/y vs. -0.8% in April. The economy remains sluggish, which explains the central bank’s surprise 50 bp cut in early June. Next policy meeting is July 18 and no change is expected then. However, we see a small chance of another dovish surprise.

Malaysia reports May trade data Thursday. In ringgit terms, exports are expected to rise 3.7% y/y and imports by 2.1% y/y. However, in USD terms, both series have been contracting y/y for several months now due to the impact of regional trade tensions. The central bank is likely to remain on hold this year. Next policy meeting is July 9 and no change is expected then.

Hungary reports May retail sales Thursday, which is expected to rise 6.2% y/y vs. 7.1% in April. May IP will be reported Friday, which is expected to rise 4.9% y/y vs. 6.0% in April. The economy remains firm even as inflation continues to rise. The central bank just tightened liquidity in the interbank market, and we suspect an outright rate will be contemplated in H2. Next policy meeting is July 23 and further mild tightening seems likely.

Philippines reports June CPI Friday, which is expected to rise 2.8% y/y vs. 3.2% in May. If so, inflation would be below the 3% target for the first time since December 2017. Next policy meeting is August 8 and another 25 bp cut to 4.25% is likely then.

India presents its budget for FY2020/21 Friday. The April-May budget gap is already over half of the deficit targeted for all FY2019/20 ending March 31. This is due in large part to pre-election spending, but slow growth has also hurt revenue collection.

Taiwan reports June CPI Friday, which is expected to rise 0.86% y/y vs. 0.94% in May. While the central bank does not have an explicit inflation target, low price pressures should allow it to keep rates steady this year. Next quarterly policy meeting is in September.

Colombia reports June CPI Friday, which is expected to rise 3.37% y/y vs. 3.31% in May. If so, inflation would remain in the top half of the 2-4% target range. Next policy meeting is July 26 and no change is expected then.