Emerging-market equities rose for a fourth week last week as
signs of easing trade tensions supported the appetite for riskier assets.
Currencies dropped amid a stronger dollar.
The following is a roundup of emerging-markets news and
highlights for the week ending January 20:
Highlights
China has offered to go on a six-year buying spree to ramp
up imports from the US, in a move that would reconfigure the relationship
between the world’s two largest economies, according to officials familiar with
the negotiations.
China will also cut taxes "on a larger scale" to
help support its slowing economy, according to senior economic policy officials.
Chinese exports slumped in December, fueling concerns about global growth.
Current monetary policy is in line with the economic
situation and prices, People’s Bank of China Deputy Governor Zhu Hexin said.
Trump administration officials are considering measures to
roll back tariffs on Chinese products in order to calm financial markets, the
Wall Street Journal reported; the US Treasury Department quickly denied the
report President Donald Trump canceled the US delegation’s trip to the global
economic summit in Davos, citing the government shutdown, which is now the
longest on record.
Trump and North Korean leader Kim Jong Un are planning to
meet near the end of February in Vietnam for a second summit, despite evidence
that the Asian country is advancing its nuclear weapons program.
Federal authorities in Seattle are investigating Huawei
Technologies for allegedly stealing trade secrets from US partner companies,
according to people familiar with the matter, which could complicate trade
negotiations between the US and China.
Saudi Arabia and four other Gulf nations will join JPMorgan
Chase & Co’s emerging-market bond indexes this month, potentially paving
the way for billions of dollars in inflows into the securities.
The Russian ruble was among the best performers; the Senate
blocked a Democratic bid to force the Treasury Department to keep sanctions on
three Russian companies linked to oligarch Oleg Deripaska, as most Republicans
backed the Trump administration’s plan to lift the penalties.
Trump warned Turkey of economic devastation if its army
attacks Kurds in Syria. Trump and Turkish President Recep Tayyip Erdogan later
talked on the phone to sort out disagreements, boosting the lira South Africa’s
central bank maintained its key interest rate at 6.75%, and trimmed inflation
expectations at its first meeting of the year.
Mexico sold its first global bonds under President Andres
Manuel Lopez Obrador’s administration, paying a spread of 185 basis points over
Treasuries to raise $2bn with 10-year notes
Asia
Chinese exports and imports fell in December, showing the
impact of the trade war and an economic slowdown.
The PBOC has been quietly guiding interbank borrowing costs
down without actually cutting official interest rates, with the latest move a
record one-day injection of cash into the market China’s top lawmaking body has
fast-tracked approval of a foreign investment bill, in a sign that President Xi
Jinping wants to advance policy moves to support trade negotiations with the US.
India’s rupee was among the underperformers; The Reserve
Bank of India, in consultation with the Indian government, has decided to
rationalise the framework for external commercial borrowings and
rupee-denominated bonds to improve the ease of doing business.
The trade deficit narrowed in December to $13.1bn from a
$16.7bn shortfall in November. The median estimate in a Bloomberg survey was
$14.5bn.
Inflation rate came in at 2.19% in December, compared with
2.33% the previous month Indonesia’s rupiah was among the worst performers,
while the Jakarta Composite Index advanced for a fourth week; Bank Indonesia
held its policy rate at 6%, as expected in a Bloomberg survey.
Indonesia posted a record trade deficit in 2018 after a
slump in the rupiah boosted imports and the trade war hurt exports; the
shortfall was $1.1bn in December, bringing the full-year deficit to $8.6bn,
data from the statistics bureau showed.
Indonesia is prepared to raise taxes on imports again if it
fails to boost exports to rein in the country’s ballooning trade deficit,
Finance Minister Sri Mulyani Indrawati told the Financial Times.
Presidential candidate Prabowo Subianto is proposing deep
tax cuts to bolster Southeast Asia’s largest economy. President Joko Widodo
pledged to intensify the fight against corruption through merit-based political
appointments in the first presidential debate, while Prabowo mooted higher pay
for bureaucrats to tackle the menace seen as hindering the country’s
development.
The baht was among the outperformers; Bank of Thailand said
in its report assessing financial-sector stability that the search for yields
has led to an under-pricing of risk, a possible source of fragility for parts
of the financial sector.
The Philippines Stock Exchange Index advanced for a third
week; the central bank sees easing inflation boosting consumption and
investment this year, Deputy Governor Diwa Guinigundo said Bangko Sentral ng
Pilipinas will consider reducing banks’ reserve-requirement ratios if inflation
expectations aren’t "in danger of being dis-anchored," Guinigundo
said.
Growth in overseas remittances came in below estimates in
November. Malaysia’s government formed a committee that’s expected to reduce fiscal
debt and liabilities to a manageable level within the next 18 months.
Prime Minister Mahathir Mohamad considered giving subsidies
to industries he wants to promote Malaysia’s intake of direct taxes rose to a
record last year. Vietnam won’t devalue the dong to boost exports and the
government is seeking to attract more investors, citing a red-hot economy,
business-friendly policies and a Communist party led by free-traders.
EMEA
The Turkish lira rallied after the nation’s central bank
left interest rates unchanged and reaffirmed its stance on inflation.
Private-sector money fled Russia at the fastest pace since
2014 last year as fresh US sanctions and the threat of more to come dented
confidence.
More than $67bn left the country in 2018, just under half
the volume of outflows four years ago, when falling oil prices and Western
sanctions over Russia’s annexation of Crimea battered the ruble.
November trade surplus was larger than expected Jitters over
Romania’s tax on bank assets continued to cause volatility for banking stocks.
Romanian lenders are pushing for exemptions to a proposed tax on assets after
the finance ministry frustrated their hopes of a lower rate, according to
people with knowledge of the matter.
The Hungarian central bank gave its clearest indication yet
that the unwinding of monetary policy stimulus is imminent, sparking a rally in
the forint.
Poland’s industrial output fell more than expected in
December, while employment rose in line with economists’ forecast. Saudi
Arabian Oil company could tap the bond market for about $10bn to help fund the
acquisition of petrochemicals giant Saudi Basic Industries, according to the
country’s Energy Minister Khalid Al-Falih.
Lebanon’s dollar bonds recovered from their plunge to a
record low after top officials said the nation was discussing how to reduce the
budget deficit and implement fiscal reforms – but would not restructure its
debt.
The caretaker economy minister said the country is hopeful
of getting outside financial support, but couldn’t confirm that Qatar is
prepared to deposit $1bn with the central bank.
Egypt plans to issue between $3bn and $7bn worth of
international bonds in the first quarter of the year, Finance Minister Mohamed
Maait said, amid an outflow of foreign capital from local debt markets that
could test its ability to meet budget deficit reduction targets.
Israeli Prime Minister Benjamin Netanyahu ratcheted up his
campaign to discredit Israeli journalists and his left-wing opponents, as a
decision on his possible indictment nears.
Latin America
Mexico reopened most fuel pipelines after closures that
caused gasoline shortages in several states.
Bank of America Merrill Lynch cut its forecast for Mexico’s
economic growth in 2019 to 1% from 2%.
Brazil’s Ibovespa rallied for a fourth week; President Jair
Bolsonaro is expected to give the green light to a pension reform bill before
January 28, his chief of staff said. Bolsonaro signed a decree loosening gun
regulations and hinted at further measures to arm citizens facing rampant crime.
The central bank’s outgoing chief Ilan Goldfajn said
emerging markets face a growing risk from the economic slowdown rather than
from further rate hikes by the Federal Reserve.
Argentina’s currency returned to the central bank’s targeted
range after trading below the lower limit for several days.
Consumer prices rose less than forecast month-on-month in
December, with inflation easing for a third month in response to the central
bank’s aggressive monetary policy.
Argentina and Brazil agreed to review the common external
tariffs set by the Mercosur trade bloc and improve access to markets. Uruguay
tapped international debt markets by selling $850m of 12-year bonds and has
agreed to buy back notes due 2024 and 2027 under a cash tender offer.