Specter of idiosyncratic risks returns to haunt EMs
With the US-China trade dispute dominating headlines this year, idiosyncratic risks in emerging markets have played second fiddle to concerns over global growth.
Not anymore.
South Africa, Nigeria, Thailand and Russia each gave money managers a reminder of how quickly local issues can flare up over the past week. It happened just as some investors were starting to ask if the emerging-market trade was getting overcooked. A Bank of America Merrill Lynch survey of global fund managers showed that not only are developing-nation assets the most popular in the world, the trade has never been so crowded.
With the rand last week’s biggest decliner, investors will be keen to hear details of the South African government’s plan to split 96-year-old Eskom when finance minister Tito Mboweni presents the nation’s budget. Standard Chartered cautioned the South African currency was most at risk of a large sell-off among high-yielding currencies this year.
Nigerian is counting the cost after the would-be February 16 presidential election was postponed at the 11th hour, with dollar-bond yields rising and stocks falling on Monday. For the record, Indonesia’s central bank, among the more hawkish in emerging markets last year, decides interest rates on Thursday.
The MSCI’s index of currencies capped a second week of declines Friday, the longest losing stretch since September and a whisper away from closing below its 100-week average for the first time since August. When it fell past that level in 2014, the gauge went a losing run that extended into 2016. The index rebounded on Monday.
Even inaction is action
So long as capital inflows are healthy, Indonesia’s policy makers probably won’t feel compelled to raise rates this year, even after the nation’s current-account deficit widened in the fourth quarter of 2018, according to Helmi Arman, an economist in Jakarta at Citigroup Inc.
Thai growth
Thailand’s economy grew at a faster pace in the fourth quarter than the previous three months, as local demand helped to offset a slide in exports, according to official figures released MondayGross domestic product rose 3.7 percent from a year ago, up from a previously reported 3.3% in the third quarter and compares with the median estimate for a 3.6% expansion in a Bloomberg survey. The economy grew 4.1% for the whole of 2018
Let’s talk politics
Brazil’s proposal to overhaul its pension system will be sent to Congress on February 20, including minimum retirement ages and substantial savings to public coffers. Stocks and the real climbed after President Jair Bolsonaro gave a green light to the plan“We expect the first lower house vote to take place in June and final approval in the Senate by 4Q19,” said Alberto Ramos, the chief Latin America economist at Goldman Sachs Group Inc. in New York.
Source: moneyweb.co.za