Emerging Markets

  • EM idiosyncratic risks have diminished, but still remain an issue.

    The Rally in Several Emerging Markets is Looking for Traction

    Risk sentiment ended last week on a strong note, and that should carry over into this week.  The global liquidity backdrop remains positive for EM, with the ECB widely expected to add more stimulus on Thursday.  In a similar vein, the Fed is widely expected to remain on hold until June. 

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  • China cut its reserve ratio and South America loaded up with mostly bad news.

    China's Reserve Ratio Cut and South America's Woes Top EM News

    1) China’s central bank announced a 0.5% cut in the required reserve ratio, 2) Moody's cut the outlook on China's Aa3 rating to negative from stable, 3) Argentina and the main holdouts agreed to a debt restructuring deal, 4) Brazilian press reported that a senator implicated both Rousseff and Lula in the corruption probe as part of a plea bargain, 5) Chile is cutting back government spending this year in response to low copper prices

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  • With EAC membership, South Sudan has many new opportunities.

    Can South Sudan Take Advantage of EAC Membership?

    South Sudan’s accession to the East African Community could prove a major step forward in the economic development of the world’s newest nation.

    On March 2, the East African Community Heads of State Summit admitted South Sudan as its newest member. Accession negotiations had commenced in November 2014. The relatively accelerated timeline to its conclusion is a strong indication of the willingness of all sides to admit South Sudan to the community.

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  • Ghana celebrates its independence and stumbles toward developed status.

    Would Arthur Lewis Recognize Today's Ghana?

    Ghana was to become the testing ground for Arthur Lewis’ ideas on economic development. The excitement surrounding Ghana’s independence in 1957 as tropical Africa’s first decolonised territory captivated Lewis as thoroughly as it did African nationalists and Afrophiles around the world. Lewis, a St Lucian, went on to win the Nobel Memorial Prize in Economics in 1979.

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  • Idiosyncratic risk permeates the Emerging Market landscape.

    Heavy Data Release, Central Bank Meeting Week in Store for Emerging Markets

    EM ended last week on a soft note, due to a variety of both external and internal factors.  Firm US data continue to support our call for resumed Fed tightening, and this gave the dollar a bit of a bid.  With the dollar gaining against the majors, this spilled over into generalized dollar gains vs. EM as well.  Weak data out of China this week poses a risk to EM, though we suspect that how China markets react will set the tone for the wider EM.

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  • PMs, FMs, and Central Bank Presidents are making headlines in the EM world.

    Emerging Market Political Leaders are Making Headlines

    1) PBOC appears to have confirmed a somewhat easier monetary stance, 2) Malaysian Prime Minister Najib is consolidating his grip on power, 3) Hungarian central bank Vice Governor Nagy hinted at more rate cuts, 4) Press reports suggest South African Finance Minister Gordhan threatened to resign last week, 5) Brazil was downgraded to sub-investment grade by Moody's, 6) Colombia’s central bank tweaked its FX intervention mechanism

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  • South Africa's economy has been lagging even its population growth.

    South Africa's Gordhan Warns that Reforms Will Take Time

    The South African economy has been performing very poorly. Like other commodity exporters, export prices have weakened dramatically, company results have deteriorated and foreign and domestic investment have slowed down sharply. South Africa’s performance has been - and is expected to continue to be - worse than that of many other African economies, including commodity exporters. Africa’s anticipated growth rate for 2016 is 3.5% as against South Africa’s 0.9%.

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  • Brazil was living the BRIC dream, but now it's more of a nightmare.

    Brazil's BRIC Dream Growth Now Seems Long Ago

    Only a few years ago, Brazil exemplified the BRIC dream of rapid growth. Now it is coping with its longest recession, loss of confidence, possibly a lost decade. Dan Steinbock explains what happened, and how and when Brazil could restore to its growth.

    In summer 2016, Rio de Janeiro shall host South America’s first-ever Olympic games, which were supposed to be a great coming out carnival. However, dark clouds hover over Brazil’s growth miracle.

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  • A risk rally could be spoiled by commodity prices.

    It is Still Risk-On for Emerging Markets

    We think that it is still too early to say whether Friday's price action was simply profit taking ahead of the weekend, or the resumption of overall negative market sentiment.  We think the global backdrop remains conducive for risk, at least near-term.  China concerns are on the back burner, while markets are still skeptical about the prospects for Fed tightening.  Commodity prices are the potential spoilers to a resume risk rally, as oil ended last week on a sour note.

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  • Public service worker growth is exploding in South Africa.

    Public Service Worker Growth in South Africa is on the Rise

    The rise of public sector employment in South Africa has a much greater potential import than the private sector for the future trajectory of the economy’s employment path. We find that a key new facet of the South African labour market is an estimated wage wedge between unionised public sector workers and other formal non-agricultural workers in the labour market.

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