Emerging Markets: What Has Changed – Friday, October 13

(from my colleague Dr. Win Thin)
 

In the EM equity space as measured by MSCI, Hungary (+2.8%), Qatar (+2.6%), and Taiwan (+2.5%) have outperformed this week, while Mexico (-1.3%), Egypt (-0.8%), and Colombia (-0.5%) have underperformed.  To put this in better context, MSCI EM rose 2.2% this week while MSCI DM rose 0.8%.

In the EM local currency bond space, Hungary (10-year yield -20 bp), Poland (-18 bp), and South Africa (-15 bp) have outperformed this week, while Mexico (10-year yield +6 bp), China (+3 bp), and Philippines (+2 bp) have underperformed. To put this in better context, the 10-year UST yield fell 6 bp to 2.30%.

In the EM FX space, ZAR (+3.2% vs. USD), CLP (+1.8% vs. USD), and RUB (+1.7% vs. USD) have outperformed this week, while MXN (-1.6% vs. USD), TRY (-0.6% vs. USD), and PHP (-0.5% vs. USD) have underperformed.

Thailand announced general elections will be held in November 2018.  An exact date will be chosen around mid-2018, according to Prime Minister Prayuth Chan-Ocha. Note that elections have been delayed several times before, and so this 2018 data is not set in stone. The country has been ruled by the military since the coup in 2014.  

Czech police filed criminal charges against ANO leader Andrej Babis. The fraud charges are related to EU subsidies, and come ahead of next week’s general elections. Police also charged ANO Deputy Chairman Faltynek in the same case. Both Faltynek and Babis have denied any wrongdoing, and claim that the charges are politically motivated.

South Africa’s Supreme Court of Appeal upheld a lower court ruling that President Zuma can again face corruption charges that were previously dropped. The court called a decision by prosecutors to drop those charges in 2009 “irrational.”  No word yet on whether Zuma will indeed be charged again. However, our base case is that Zuma hangs on to power until his term ends in 2018, as he has faced down so many legal challenges before.