Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Emerging Markets Weekly Preview: Selling Pressures Continue

By Marc ChandlerMarket OverviewOct 20, 2015 12:08AM ET
www.investing.com/analysis/emerging-markets:-preview-of-the-week-ahead-268601
Emerging Markets Weekly Preview: Selling Pressures Continue
By Marc Chandler   |  Oct 20, 2015 12:08AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The week started off subdued for EM, but selling pressures continue for the most part. The dollar is mixed against majors and with the decision about the timing of the first Fed hike still up in the air, it’s hard to see how investors will commit a lot of capital into year end. The softer tone in commodity prices is also not helping EM. Still, it seems like the panic sentiment towards EM has subsided, opening the door for more differentiation amongst markets and bottom picking in assets that have been aggressively sold.

China’s weekend data deluge was mixed, but we think it was the right kind of mix to avoid roiling markets. The PBOC likely has some easing left to do, and so we would characterize China as neutral/positive risk for global markets. Brazil offers the usual mix of negative news headlines, which we would characterize as posing mostly negative risk for global markets.

Taiwan reports September export orders Tuesday, which are expected at -11.4% y/y vs. -8.3% in August. It then reports September commercial sales (-4% y/y expected) and IP (-5.4% y/y expected) on Friday. The economy is slowing, and so policymakers are likely to continue stimulus measures. The central bank should continue easing at its quarterly policy meeting in December, while the government will likely use fiscal stimulus ahead of the January elections. The ruling KMT party replaced its presidential candidate over the weekend.

Hungary's central bank meets Tuesday and is expected to keep rates steady at 1.35%. Deflation risks are persistent, with CPI at -0.4% y/y in September. If the economy continues to slow, we think the easing cycle could be restarted. The bank has been on hold since the last 15 bp cut to 1.35% back in July, but real interest rates have been rising since June. Minutes to this meeting will be released November 4.

South Africa reports September CPI Wednesday, and is expected to rise 4.7% y/y vs. 4.6% in August. It also reports August retail sales, which are expected to rise 2.8% y/y vs. 3.3% in July. The government will also release its medium-term budget policy statement Wednesday. The sluggish economy prevented the SARB from hiking rates in September, and another low inflation reading could keep it on hold at its next meeting on November 19.

Turkey's central bank meets Wednesday and is expected to keep rates steady at 7.5%. CPI rose 8% y/y in September, well above the 3-7% target range. With the lira vulnerable ahead of November 1 elections, we think the central bank is on hold for the time being. Latest polls show the ruling AKP with 40.5% support, barely changed from the 40.9% support it saw in the June vote. As such, political uncertainty may continue well past November 1.

Brazil's central bank meets Wednesday and is expected to keep rates steady at 14.25%. Earlier that day, Brazil reports mid-October IPCA inflation, which is expected to rise 9.78% y/y vs. 9.57% in mid-September. Analyst expectations are universally seeing steady policy this month, but market pricing shows some tightening expected at the November and January meetings. Current account and FDI data for September will be reported Friday. The current account is expected at -$2.2 bln, which would see the 12-month total fall to around -4% of GDP.

Mexico reports August INEGI retail sales Wednesday, which are expected to rise 4.8% y/y vs. 5.8% in July. On Thursday, Mexico reports mid-October CPI, with headline inflation expected at 2.51% y/y vs. 2.53% in mid-September. With inflation well below the 3% target, the central bank is finding it hard to justify its tightening bias from earlier this year.

Poland's central bank releases its minutes on Thursday. The central bank has been on hold since its last bp cut to 1.5% back in March. Deflation risks remain high, with CPI at -0.8% y/y in September. If the economy continues to slow, we would not rule out a resumption in the easing cycle. However, this may be more of a 2016 story, when most of the MPC will be replaced as their terms end.

Korea reports Q3 GDP on Friday, and is expected to rise 2.4% y/y vs. 2.2% in Q2. The Bank of Korea just cut its 2015 and 2016 growth forecasts to 2.7% and 3.2%, respectively. In light of recent data, this seems too optimistic. Inflation of 0.6% y/y in September is well below the 2.5-3.5% target range, and BOK forecasts it at 0.7% this year and 1.7% next year. We think downside risks will move the BOK to a more dovish stance in 2016.

Malaysia reports September CPI Friday, and is expected to rise 2.9%y/y vs. 3.1% in August. Despite falling inflation risks and a sluggish economy, Bank Negara has kept rates steady since its last 25 bp hike to 3.25% in July 2014. Political risk is rising as Prime Minister Najib faces a possible no confidence vote as parliament reconvenes after a 4-month hiatus. The government will present its 2016 budget on Friday, with Najib treading a delicate balance between austerity (to lessen downgrade risks) and spending (to shore up popular support).

Singapore reports September CPI Friday, and is expected at -0.6%y/y vs. -0.8% in August. Despite persistent deflation risks and a sluggish economy, the MAS move last week was timid. We expect further easing in 2016.

Emerging Markets Weekly Preview: Selling Pressures Continue
 

Related Articles

Michael Kramer
S&P 500 May Fall Another 15% By Michael Kramer - Jun 24, 2022 44

This article was written exclusively for Investing.comWhile stocks are down sharply on the year and cheaper in price, markets are still not reasonable from a valuation perspective....

Legal & General Investment Management
Fixed Income At A Glance By Legal & General Investment Management - Jun 24, 2022

Key points from June’s credit strategy meeting Tighter financial conditions led us to lower our short-term for the US, UK and global market to -1. We remain slightly positive at +1...

Emerging Markets Weekly Preview: Selling Pressures Continue

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email