(from my colleague Dr. Win Thin)
In the EM equity space as measured by MSCI,
China (+4.1%), South Africa (+3.2%), and Hungary (+2.4%) have outperformed this
week, while Egypt (-2.8%), Qatar (-2.7%), and Mexico (-1.7%) have
underperformed. To put this in better context, MSCI EM rose 1.9% this
week while MSCI DM rose 0.6%.
In the EM local currency bond space,
Argentina (10-year yield -13 bp), Nigeria (-5 bp), and Thailand (-4 bp) have
outperformed this week, while Mexico (10-year yield +20 bp), Brazil (+17 bp),
and Poland (+14 bp) have underperformed. To put this in better context,
the 10-year UST yield rose 4 bp to 2.38%.
In the EM FX space, CLP (+0.8% vs. USD),
CZK (+0.4% vs. EUR), and ILS (+0.3% vs. USD) have outperformed this week, while
MXN (-1.6% vs. USD), TRY (-1.6% vs. USD), and ZAR (-1.3% vs. USD) have
underperformed.
India cut taxes on gasoline and diesel to
help slow inflation. The
Finance Ministry said the basic excise duty on gasoline and diesel will be cut by
2 rupees per liter. It added that the government will lose about INR130
bln in revenues for the current FY2017/18 ending March 31 because of the cut.
Bank Indonesia signaled that the easing
cycle is nearing an end. It
said its sees little room for further rate cuts, but added that it can take
other measures to stimulate the economy. Assistant Governor Waluyo said
“It depends again on the data even though until last week we see the situation
up until the end of this year or probably next year, the room for cutting the
policy rate is not much.”
Hungarian Socialist candidate Laszlo Botka
quit the race after failing to unite the opposition. The opposition remains in disarray six months
ahead of elections. Polls show support for the Socialists dropping to
less than 10%. With such poor polling numbers, Botka was unable to gain
the backing of the other opposition parties. Several of these parties
recently announced plans to run their own candidates for prime minister.
Romania’s central bank started a
tightening cycle. While the
bank left the base rate unchanged at 1.7%, it narrowed the interest rate
corridor around that rate to 1.25 percentage points from 1.5 previously.
Governor Isarescu said another adjustment to the corridor may come at the
next meeting on November 7, adding “The period with very low interest rates is
over, and not only in Romania.”
Mexico’s government will likely adjust its
2018 budget for 2018 due to the impact of the earthquakes last month. Finance Minister Meade said that even though
the government had presented its 2018 budget in early September, "the
context had changed." No details on what the adjustments will be,
but we think this is a sensible move in light of the need for infrastructure
and reconstruction spending stemming from the earthquakes.
Disclaimer
Emerging Markets: What has Changed
Reviewed by Marc Chandler
on
October 06, 2017
Rating: