What Has Changed in EM

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  • President Trump canceled the planned summit with North Korea’s Kim Jong Un
  • Malaysia’s new Finance Minister Lim was sworn in along with 13 other cabinet ministers
  • Philippine central bank cut reserve ratios for commercial banks by one percentage point to 18% effective June 1
  • The United Arab Emirates opened up its economy to more foreign investment
  • Brazil state-run oil company Petrobras cut the price of diesel fuel by 10% for two weeks
  • Brazil President Temer dropped his reelection bid and endorsed former Finance Minister Henrique Meirelles
  • The US tightened sanctions on Venezuela following President Maduro’s controversial election victory Continue reading

Argentine Stability Remains Tenuous

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Argentinian Flag Ball – Flag of Argentina on Isolated Sphere

Argentina has been able to inject some stability into its markets with several aggressive moves.  Yet the situation remains precarious.  We believe a quick IMF deal followed by adherence to program targets are necessary but not sufficient conditions to make this stability more durable.  Argentina is likely to remain under pressure within the context of a broad-based EM sell-off. Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended Friday on a weak note, and extended the slide.  For the week as a whole, the best EM performers were PHP, TWD, and SGD while the worst were ARS, ZAR, and TRY.  With US rates continuing to move higher, we believe selling pressures on EM FX will remain in play this week.  Our recently updated EM Vulnerability Table supports our view that divergences within EM will remain. Continue reading

What Has Changed in EM

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  • Bank Indonesia started a tightening cycle with a 25 bp hike to 4.5%
  • Jailed Malaysia opposition leader Anwar Ibrahim was released by new Prime Minister Mahathir
  • Malaysia scrapped the controversial 6% goods and services tax (GST)
  • Violent protests shook Israel as the relocated US embassy opened in Jerusalem
  • Argentina committed to fiscal tightening as part of a comprehensive IMF program
  • Brazil central bank delivered a hawkish surprise and kept rates steady at 6.5%.
  • Mexico has started its annual oil hedging program Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended Friday on a week note, and capped of another generally negative week.  Worst performers last week were ARS, BRL, and TRY while the best were ZAR, RUB, and KRW.  We remain negative on EM FX and look for losses to continue.  US retail sales data Tuesday pose further downside risks to EM FX.  Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX came under intense selling pressures last week.  The worst performers were ARS, TRY, and MXN while the best were PHP, KRW, and TWD.  US rates are likely to remain the key driver for EM FX, and so PPI and CPI data will be closely watched this week.  We believe EM FX will remain under pressure. Continue reading

What Has Changed in EM

IconBank Indonesia is taking measures to stabilize the local bond market.  The Philippine central bank is tilting more hawkish.  Czech National Bank cut its inflation forecasts.  The Turkish government is loosening fiscal policy to drum up popular support.  S&P downgraded Turkey to BB- with stable outlook.  Argentina officials are taking significant measures to support the peso.  Brazil central bank made a subtle shift in its FX intervention strategy Continue reading

EM FX Technical Picture

MindMkts Blog ICON-FX TechPicThere’s really no specific news behind this week’s EM washout.  Higher US rates are one major factor, perhaps ongoing trade tensions are another.  Yet this week’s price action is simply a continuation of the trend that’s been seen all quarter.  Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended Friday on a firm note, capping off a generally softer week overall.  TRY and PHP were the best performers last week, while CLP and ZAR were the worst.  US core PCE, ISM manufacturing, FOMC meeting, and jobs data all pose risks to EM this week.  We remain a bit defensive on risk assets in general now. Continue reading