(from my colleague Dr. Win Thin)
- China plans to issue its first USD-denominated bond since 2004.
- China’s largest banks banned North Koreans from opening new accounts.
- The UN Security Council approved new sanctions on North Korea.
- Relations between Poland and the European Commission remain tense.
- Brazil’s central bank appears to be signaling discomfort with ongoing BRL strength.
- Brazil President Temer faces a second set of criminal charges.
- Peru’s entire cabinet resigned after losing a confidence vote in Congress.
In the EM
equity space as measured by MSCI, Czech Republic (+2.7%), China (+2.4%), and
Korea (+2.3%) have outperformed this week, while Qatar (-2.0%), Singapore
(-0.9%), and Egypt (-0.7%) have underperformed. To put this in better
context, MSCI EM rose 1.0% this week while MSCI DM rose 1.0%.
In the EM
local currency bond space, Argentina (10-year yield -43 bp), Colombia (-13 bp),
and Nigeria (-12 bp) have outperformed this week, while Indonesia (10-year
yield +14 bp), Czech Republic (+10 bp), and Thailand (+10 bp) have
underperformed. To put this in better context, the 10-year UST yield rose
15 bp to 2.20%.
In the EM
FX space, ARS (+1.3% vs. USD), COP (+0.4% vs. USD), and MXN (+0.2% vs. USD)
have outperformed this week, while ZAR (-1.9% vs. USD), BRL (-1.3% vs. USD),
and HUF (-0.9% vs. EUR) have underperformed.
China
plans to issue its first USD-denominated bond since 2004. The $2 bln
issuance will mostly serve as a benchmark for corporate issuance, as the
sovereign clearly does not need to raise foreign currency. At the same
time, China announced that it will issue only CNY14 bln of so-called dim sum
bonds in Hong Kong this year, the smallest since 2010.
China’s
largest banks banned North Koreans from opening new accounts. Some banks
are going even further, saying they are cleaning out existing accounts held by
North Koreans by preventing new deposits. Perhaps this is another clear
sign that China has finally run out of patience with Pyongyang.
The UN
Security Council approved new sanctions on North Korea. This was in response to
its latest missile and nuclear tests. After the US dropped demands for an
oil embargo, it won support from Russia and China as the 15-member Security
Council passed the resolution unanimously.
Relations
between Poland and the European Commission remain tense. The European
Commission sent a final warning to the government over its planned judicial
reform legislation, stressing that “the independence of Polish courts will be
undermined.” The Polish government has one month to take the necessary
measures to address these concerns. If Poland does not take appropriate
measures, the EC may refer the case to the EU court in Luxembourg.
Brazil’s
central bank appears to be signaling discomfort with ongoing BRL strength. It announced
a partial roll over of FX swaps, allowing an estimated $4 bln worth to expire.
This will in turn create USD demand. We do not think the bank is
targeting any particular level of the exchange rate, however.
Brazil
President Temer faces a second set of criminal charges. Chief
prosecutor Janot formally charged Temer with obstruction of justice and
criminal conspiracy, adding that he and several of his aides took kickbacks
worth BRL587 mln relating to government contracts. The president’s press
office denied the charges, saying that Janot "accepted false and lying
testimony."
Peru’s
entire cabinet resigned after losing a confidence vote in congress. The vote was
a lopsided 77-22 with 16 abstentions. Education Minister Martens is under
fire for the government’s handling of a teachers strike. If the new
cabinet also loses a confidence vote, President Kuczynski can dissolve congress
and call fresh elections.
Emerging Markets: What has Changed
Reviewed by Marc Chandler
on
September 15, 2017
Rating: