Emerging Markets

  • The Emerging Markets status update

    A Preview of the Emerging Markets

    EM has started the year by extending many of the trends present towards the end of last year. The ruble is on the defensive along with Brazilian assets, while the Shanghai Composite continues to rally. The continued fall in oil prices will also ensure that the trading dynamics of importers vs. exporters will remain intact. But soon, we will be reaching the point in which secondary impacts will start to be counted as well. For example, the potential boost to the US economy from lower oil prices could counter some of the negative effect of lower energy exports for Mexico. 

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  • The Emerging Markets status update

    A Preview of the Emerging Markets

    EM currencies stabilized after the FOMC meeting last week.  Yet the Fed clearly signaled that it remains on track to start hiking rates around mid-2015.  While Yellen’s guidance was taken as dovish (tightening won’t be at a predictable, “measured” pace), we still feel the looming Fed tightening cycle remains negative for EM.  Furthermore, commodity prices remain soft.  This and the upcoming turn in the US interest rate cycle should maintain downward pressure on EM currencies through H1 2015.

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  • Effects from the removal of U.S. sanctions will take time to see

    A Cuban Economic Boom? Not so fast.

    The restoration of full diplomatic relations between the US and Cuba, announced simultaneously by Barack Obama and Raúl Castro yesterday, is a huge political breakthrough. The benefits to the Cuban economy, however, will be more gradual.

    Economic sanctions by the US against Cuba began in 1960. They consisted of a range of measures, only some of which can be removed by the US president in the short term. The rest require congressional approval, which is likely to be a difficult and protracted process.

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  • The Emerging Markets status update

    An Emerging Markets Status Update

    Over the last week, Colombia (+9.5%), Mexico (+1.9%), and Chile (+0.1%) have outperformed in the EM equity space as measured by MSCI, while Hungary (-9.6%), Turkey (-7.3%), and Russia (-5.8%) have underperformed.  To put this in better context, MSCI EM fell -1.0% over the past week while MSCI DM fell -0.2%.

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  • A Preview of the Emerging Markets

    What's Up? - in the Emerging Markets

    EM currencies remain soft ahead of the FOMC meeting Wednesday.  The Fed is widely expected to modify the language in its forward guidance, which would be consistent with the first rate hike that is expected around mid-2015.  This would be unequivocally negative for EM.  Indeed, lower commodity prices and the looming turn in the US interest rate cycle are likely to maintain downward pressure on EM currencies well into next year.

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  • The Emerging Markets are busy as are the Frontier Markets

    A Review of the Emerging Markets

    1) Indonesia’s recently elected President Jokowi is facing his first major popular challenge

    2) Turkey raised the daily dollar auction amount from $20 mln to $40 mln

    3) There are signs of some growing concern over currency weakness in Mexico  

    4) Brazil central bank chief Tombini is already changing the tune from the statement of the last COPOM meeting

    5) Moody's upgraded the Philippines one notch to Baa2 with stable outlook

    6) Ethiopia raised $1 bln via a debut 10-year Eurobond sale, amidst strong demand  

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  • How are the BRICS in 2014?

    A 2014 Health Report on BRICS

    In 2001, the term BRIC was coined by Jim O'Neill, formerly with Goldman Sachs, who had used the acronym in his thesis on emerging markets of Brazil, Russia, India and China. With inclusion of South Africa in 2010, BRICS was formed. It started to reflect the strength of the emerging markets across the globe. Together BRICS comprises of 40% of the world’s population, 21% of the world’s GDP and 30% of the global territory. To many, BRICS had only been holding only meetings, never reaching on any big development or funding plans.

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  • The Emerging Markets Review

    This Week in the Emerging Markets

    Falling commodity prices and better US economic data are the biggest macro drivers for EM, overriding just about all idiosyncratic variables – perhaps with the exception of the weaker yen for Korea. We note that aside from the huge fall of over 40% in the price of Brent oil from its highs, iron ore is down about 50% this year. Brazil, China and India are the biggest EM producers of iron ore. Markets are also becoming apprehensive of the parabolic rise in Chinese equities, in part due to expectations for further easing, which could be dashed just as fast as they have been created.

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  • Changes and developments among the Emerging Markets

    An Emerging Markets Review

    1) Some EM policymakers are becoming more worried about weak currencies 

    2) The PBOC failed to drain liquidity for the past three sessions, fueling speculation of a cut in reserve requirements 

    3) The Reserve Bank of India keep rates unchanged, but indicated potential easing for the first time this cycle 

    4) Last weekend’s elections in Taiwan resulted in a stunning loss of the ruling Kuomintang

    5) Israel Prime Minister Netanyahu will seek early general elections, likely strengthening the right wing of the party

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  • Brazil is out of a recession for now

    Brazil's Cautionary Tale of Economic Woe and Recovery

    If Brazil has ever suffered from a financial turmoil, it mostly has been more of a contagion effect like the 1997 Asian Crisis and 1998 Russian Crisis.  It has been considered one of the strongest emerging markets and a large contributor towards global growth. However, things started looking a bit foggy for Brazil since 2008 financial crisis. It was observed that a country that could be a potential contributor to global growth could also pose an equal threat to financial stability.

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