Emerging Markets: What Has Changed - November 27, 2015

Guest post from my colleagues Dr. Win Thin and Ilan Solot

1) Mauricio Macri, the mayor of Buenos Aires, won the Argentine presidential election with 52% of vote
2) The latest political developments in Brazil rocked asset prices
3) The Brazilian central bank kept rates on hold at 14.25%, as expected, but two members called for a 50 bp hike
4) China markets are under pressure after reports that the three top brokers are under investigation as part of the larger anti-corruption campaign
5) Malaysia’s embattled 1MDB investment fund found a buyer
6) The Hungarian Central Bank purchased a majority stake in country’s stock exchange
7) The Nigerian central bank surprised markets with a 200 bp cut in the benchmark rate
8) A recent poll shows that Mexican President Pena Nieto’s popularity is back on the rise

In the EM equity space, Hungary (+2.3%), Korea (+2.0%), and Malaysia (+1.2%) have outperformed over the last week, while China (-5.8%), Turkey (-5.6%), and Poland (-3.4%) have underperformed. To put this in better context, MSCI EM fell -1.8% over the past week while MSCI DM fell -0.1%.

In the EM local currency bond space, Poland (10-year yield -10 bp), Thailand (-9 bp), and Singapore (-7 bp) have outperformed over the last week, while Turkey (10-year yield +28 bp), Russia (+20 bp), and Mexico (+17 bp) have underperformed. To put this in better context, the 10-year UST yield fell -6 bp over the past week.

In the EM FX space, MYR (+0.8% vs. USD), KRW (+0.1% vs. USD), and CZK (+0.1% vs. EUR) have outperformed over the last week, while TRY (-3.0% vs. USD), ZAR (-2.5% vs. USD), and RUB (-2.1% vs. USD) have underperformed.

1) Mauricio Macri, the mayor of Buenos Aires, won the Argentine presidential election with 52% of the vote. Daniel Scioli, representing continuity of the Kirchner government, took 48% of the votes. The results were in line with the polls. Now attention turns to the cabinet and his inauguration on December 10. Macri ran on a center-right platform, so let’s see how forcefully he will keep to his campaign promises and what will happen with the currency. Still, there is certainly room to be optimistic.