(from my colleague Dr. Win Thin)
In the EM equity space as measured by MSCI, Peru (+8.2%), Chile (+7.0%), and Qatar (+5.0%) have outperformed this week, while Korea (-1.5%), Russia (-1.4%), and Mexico (-1.2%) have underperformed. To put this in better context, MSCI EM rose 2.0% this week while MSCI DM rose 0.7%.
In the EM local currency bond space, South Africa (10-year yield -23 bp), Turkey (-15 bp), and Indonesia (-13 bp) have outperformed this week, while Mexico (10-year yield +27 bp), Colombia (+12 bp), and India (+10 bp) have underperformed. To put this in better context, the 10-year UST yield rose 13 bp to 2.49%.
In the EM FX space, ZAR (+3.9% vs. USD), CLP (+2.1% vs. USD), and PEN (+1.8% vs. USD) have outperformed this week, while ARS (-3.0% vs. USD), MXN (-2.2% vs. USD), and THB (-0.7% vs. USD) have underperformed.
Fitch upgraded Indonesia by a notch to BBB with stable outlook. Fitch noted that Indonesia’s resilience to external shocks is among the key factors behind the upgrade. Our own sovereign ratings model has Indonesia at BBB/Baa2/BBB and so we agree with the move and look for matching moves by both S&P and Moody’s.
EU-Poland tensions entered a new phase. The EU proposed sanctions under the so-called Article 7 option. This isn’t a huge surprise after the recent passage of the controversial judicial reforms in Poland. Right after the EU announcement, Polish President Duda signed those reforms into law. However, a unanimous EU vote is needed for sanctions and Hungary’s Orban has already pledged to block them.
Market favorite Cyril Ramaphosa was elected as the new ANC President over opponent Nkosazana Dlamini-Zuma. The vote was 52-48% in favor of Ramaphosa. In a note of caution, three of the six officials elected to the ANC’s governing body are Zuma supporters, as do reports suggesting a slim majority in the ANC National Executive Council also lean Zuma. Ramaphosa may not see smooth sailing at the top.
Leave A Comment