EM Preview for the Week Ahead

Market sentiment rallied last week on a lot of unsubstantiated claims by President Trump regarding China trade talks.  At best, we know there is no further escalation (for now).  At worst, the two sides remain far apart, and a deal is unlikely until 2020.  That’s no reason to load up on EM.  As long as current and planned tariffs are in effect, global growth risks will remain high and EM will continue to suffer.

Thailand August CPI rose 0.52% y/y vs. 0.70% expected and 0.98% in July.  Inflation fell further below the bottom of the 1-4% target range.  Bank of Thailand just started the easing cycle in August.  Next policy meeting is September 25.  If the baht remains relatively strong, then another cut seems likely.

Indonesia reports August CPI Monday and is expected to rise 3.51% y/y vs. 3.32% in July.  If so, inflation would be right at the center of the 2.5-4.5% target range.  Next policy meeting is September 19.  Bank Indonesia has delivered two straight cuts in this cycle.  If the rupiah remains relatively stable, then a third straight cut seems likely.

Turkey reports Q2 GDP Monday, which is expected to contract -2.0% y/y vs. -2.6% in Q1.  It reports August CPI Tuesday and is expected to rise 15.60% y/y vs. 16.65% in July.  If so, inflation would be the lowest since June 2018.  The central bank just started the easing cycle in July with a larger than expected 425 bp cut.  Next policy meeting is September 12.  If the lira remains relatively stable, then another large cut (200-300 bp) seems likely.

Brazil reports August trade Monday.  July IP will be reported Tuesday, which is expected to contract -1.0% y/y vs. 5.9% in June.  August IPCA inflation will be reported Friday.  COPOM just cut rates 50 bp in July.  Next policy meeting is September 18 and another 50 bp cut is expected then.

Korea reports August CPI Tuesday and is expected to rise 0.2% y/y vs. 0.6% in July.  If so, inflation would move further below the 2% target.  July current account data will be reported Thursday.  After cutting in July, Bank of Korea delivered a dovish hold in August.  Next policy meeting is September 25.  If the data remain weak, then another cut then seems likely.

South Africa reports Q2 GDP Tuesday, with growth expected at 0.7% y/y vs. 0.0% in Q1.  CPI rose only 4.0% y/y in July, the lowest since January.  SARB just started the easing cycle with a 25 bp cut to 6.5% in July.  Next policy meeting is September 19 and another 25 bp cut is likely then.  Q2 current account data will be reported Thursday, which is expected at -3.1% of GDP vs. -2.9% in Q1.

Chile central bank meets Tuesday and is expected to cut rates 50 bp to 2.0%.  Ahead of the decision, Chile reports July retail sales and they are expected to rise 3.0% y/y vs. -0.9% in June.  Chile reports August CPI and trade Friday.  Inflation is expected at 2.3% y/y vs. 2.2% in July.  If so, inflation would remain near the bottom of the 2-4% target range.

Hungary reports July retail sales Wednesday, which are expected to rise 5.5% y/y vs. 5.2% in June.  July trade and IP will be reported Friday, with IP expected to rise 5.9% y/y WDA vs. 4.1% in June.  Next policy meeting is September 24, no change is expected then.

Philippines reports August CPI Thursday, which is expected to rise 1.8% y/y vs. 2.4% in July.  If so, inflation would be the lowest since October 2016 and below the bottom of the 2-4% target range.  The central bank cut rates in May and August.  Next policy meeting is September 26 and another 25 bp cut seems likely.

Czech Republic reports July retail sales Thursday and are expected to rise 5.9% y/y vs. 0.2% in June.  July construction and industrial output and trade will be reported Friday.  The central bank has been on hold since the last 25 bp hike to 2.0% in May.  Next policy meeting is September 25 and no change is expected then.

Russia reports August CPI Thursday, which is expected to rise 4.4% y/y vs. 4.6% in July.  If so, inflation would be the lowest since December 2018 and nearing the 4% target.  The central bank then meets Friday and is expected to cut rates 25 bp to 7.0%.

Colombia reports August CPI Thursday, which is expected to rise 3.83% y/y vs. 3.79% in July.  If so, inflation would be within the 2-4% target range.  Next policy meeting is September 23 and no change is expected then.