Emerging Markets: Week Ahead Preview – April 30

(from my colleague Dr. Win Thin)
 

EM FX ended last week on a mixed note. Indeed, the week and the month were also very much mixed for EM, reflecting a variety of global and country-specific drivers impacting these countries. This week’s US jobs data could bring Fed tightening back as a major driver for EM.  

We will also get the first snapshots of trade in April from Korea and Brazil, as well as Caixin PMI readings for China. Official April manufacturing PMI was reported over the weekend at 51.2 vs. 51.7 expected and 51.8 in March, and so there are downside risks to this week’s Caixin PMI readings.

Korea reports April trade data Monday. Exports are expected to rise 17% y/y and imports by 18.7% y/y. It then reports April CPI Tuesday, which is expected to rise 2.1% y/y vs. 2.2% in March. Given downside risks from political uncertainty (both domestic and regional), we think the BOK will remain on hold for now. Next policy meeting is May 25, no change expected then.

Thailand reports April CPI Monday, which is expected to rise 0.72% y/y vs. 0.76% in March. This would be below the BOT’s target range of 1.0-4.0%. For now, we think policymakers are focusing on boosting growth, and so rates are likely to remain steady for now. Next policy meeting is May 24, no change expected then.

Peru reports April CPI Monday, which is expected to rise 4.0% y/y vs. 3.97% in March. This would still be above the 1-3% target range. Until some significant disinflation is seen, we think that the central bank will remain on hold. Next policy meeting is May 11, no change expected then.

Brazil reports April trade data Tuesday. It then reports March IP Wednesday, which is expected to rise 2.2% y/y vs. -0.8% in February. The economy remains weak, and so the central bank is likely to continue front-loading its rate cuts. Next COPOM meeting is May 31, and another 100 bp cut to 10.25% seems likely.