EM Review: Biden Inauguration Helped Push Stocks to Fresh Highs

A series of fresh records in emerging-market stocks led to a fourth weekly advance last week, even as Covid lockdowns hit risk appetite on Friday. Optimism over additional U.S. stimulus under President Joe Biden and the dovish outlook for major central banks supported the gains. Chinese and South Korean data showed the economic recovery in Asia is gaining momentum, though risks remain in the form of U.S.-China tensions as Biden begins his presidency. Developing-nation currencies declined slightly as policy makers in some emerging economies signaled a hawkish turn, while virus concerns weighed on risky assets and boosted the dollar.

The following is a roundup of emerging-market news and highlights for the week through Jan. 24:

Click here for our emerging-markets weekly preview and listen here to our weekly podcast.

Highlights:

  • Biden’s inaugural address included an appeal to end America’s “uncivil war” and reset the tone in Washington. He embarked on a blitz of executive actions spanning immigration to climate and health
    • Janet Yellen invoked an enduring era of low interest rates in delivering the Biden administration’s opening argument to lawmakers for its $1.9 trillion Covid-19 relief proposal
    • The House’s article of impeachment against former President Donald Trump will be delivered to the Senate on Monday, triggering the start of his unprecedented second trial in the chamber
  • Biden’s cabinet picks signaled the new administration would continue some of Donald Trump’s hard-line economic policies toward China

    • In one of the final acts of the Trump administration, the U.S. government notified several of Huawei Technologies Co.’s suppliers that it’s revoking their licenses to work with the Chinese company
    • China failed to meet its 2020 trade deal targets with the U.S. in a year marked by pandemic-related disruptions and an increasingly tense relationship with the Trump administration
  • As concern over vaccine disparity across the world deepens, the World Health Organization is struggling to keep pace with rich western countries in apporving shots for use -- slowing down the Covax initiative which poorer countries are relying on for inoculation
    • Hong Kong for the first time will lock down tens of thousands of residents in a bid to contain a worsening outbreak of the coronavirus, local media outlets reported
    • Mexico had a record daily increase of 1,803 Covid-19 deaths, Health Ministry data showed
    • India will begin shipments of Covid-19 vaccines to Brazil and Morocco, followed by Saudi Arabia and South Africa
    • Indonesia recorded its highest number of fatalities from the coronavirus since the outbreak began as movement restrictions were extended in two major islands
  • China’s economy roared back to pre-pandemic growth rates in the fourth quarter as its industrial engines fired up to meet surging demand for exports
  • South Korea’s early trade data showed exports continued to rise in January, as demand for tech products stayed resilient amid a global resurgence of the coronavirus
  • Turkey’s sovereign assessment was kept unchanged by S&P Global Ratings, which cited the nation’s “modest” net general government debt
    • Greece’s long-term foreign currency debt rating was affirmed by Fitch at BB, two levels below investment grade
  • Indonesia’s central bank left its key interest rate unchanged at a record low, projecting optimism the economy is recovering and inflation will remain tame
    • Malaysia kept its benchmark rate unchanged, saving its policy ammunition as the country grapples with a surge in Covid infections
    • Turkey’s central bank left its key rate at 17% at the first meeting of the year, pledging to keep it elevated for an “extended” period
    • Brazil’s central bank kept the Selic unchanged at 2% for the fourth meeting but dropped its pledge to keep borrowing costs steady in the foreseeable future
    • South Africa’s central bank held its benchmark rate for a third meeting and signaled tightening may start sooner than previously indicated
  • Mexican President Andres Manuel Lopez Obrador said he tested positive for Covid-19, after a weekend trip that took him to two states amid a record climb in the nation’s cases and deaths in the past week
Asset moves last weekWeekly
MSCI EM stocks index+2.6%
MSCI EM FX index-0.2%
Bloomberg Barclays global EM local-currency bond index-0.1%

Asia:

  • China sanctioned former U.S. Secretary of State Michael Pompeo and other former Trump administration officials just as President Biden was being inaugurated. The White House called the last-minute moves “unproductive”
    • China’s Sinovac Biotech Ltd. defended the efficacy of its Covid-19 shot, saying the vaccine is more effective in preventing the disease if the two-dose regime is administered over a longer time frame
    • The country expects a sharp downturn in travel over the Lunar New Year period compared with pre-pandemic levels following new restrictions to control coronavirus outbreaks
    • China’s holdings of U.S. government debt rose in November after declining for the prior five months
    • Investors in mainland China are showing unprecedented interest in Hong Kong stocks
    • The yuan foreign exchange rate is at a reasonable equilibrium level, a spokesperson for State Administration of Foreign Exchange said
    • China should keep necessary support to the economy as its development still faces huge challenges and uncertainties, China National Radio reported, citing premier Li Keqiang
    • Japan’s pension fund, the world’s largest, is determining the impact of FTSE Russell adding Chinese government debt to its bond benchmark
  • South Korea’s President Moon Jae-in said he would push for an early summit with U.S. leader Joe Biden to revive stalled nuclear talks
    • The country revised foreign-exchange prudential regulations, particularly targeted on non-bank financial institutions; the government is planning to delay the lifting of a short-selling ban
    • President Moon said he’s planning “extraordinary” measures to increase housing in a bid to rein in soaring home prices
  • Indian bond traders are bracing for more turmoil after the central bank signaled its intention to keep raising money-market rates
    • India’s troubled shadow banks face mounting challenges to a nascent recovery from the pandemic
    • India’s benchmark S&P BSE Sensex climbed above 50,000 for the first time as foreign funds bought local stocks amid optimism over a strong post-pandemic economic recovery
  • Pakistan’s central bank left its borrowing costs unchanged and favored keeping it lower for longer to help spur economic revival from the pandemic-induced slump
  • Thailand’s exports rose in December by 4.71%, beating economists’ estimate of a 1.35% contraction, in line with gradual global economic recovery with growth seen in industrial goods, foods, work-from-home and Covid-19 related products

    • The country’s unemployed climbed to 590,000, or 1.5% of the workforce, an increase of 223,000 from a year ago
    • Finance Ministry expects the economy will grow 4%-to-5% this year compared with 2020, which it forecast saw a contraction of 6%
    • Bangkok Metropolitan Administration will propose to ease restrictions imposed earlier to contain a new wave of Covid-19 outbreak on some businesses
  • Indonesia’s central bank Governor Perry Warjiyo said it has policy space to lower its benchmark interest rate further

    • The country is set to remove energy, communications and tourism from a list of sectors restricted to foreigners in a bid to boost investments and create jobs
    • President Joko Widodo said the government seeks to vaccinate all 181.5 million people in its Covid-19 vaccination program by year-end
    • The nation has given the first dose of Covid-19 vaccines to more than 60,000 people in the first week of its mass inoculation program
    • Indonesia sees downside risks for economic growth in the first quarter as the government imposed more restrictions to curb a worsening coronavirus outbreak, said the finance minister
  • Malaysian Opposition Leader Anwar Ibrahim has instructed his legal team to challenge Prime Minister Muhyiddin Yassin and the government on “their baseless declaration” of emergency
    • The country unveiled a 15 billion ringgit ($3.7 billion) package to help the economy weather the impact from a fresh surge in coronavirus cases
    • Palm oil production in Malaysia is being dealt a double blow from a shortage of workers to harvest the crop and torrential rains that have triggered floods
    • Malaysia’s economic growth this year will likely be at the lower end of its forecast range due to renewed movement restrictions
  • The Philippines may triple pork imports after prices nearly doubled from last year as the African swine fever cut supplies
    • The nation’s central bank has “ample room” to keep monetary policy loose as inflation remains well-anchored despite a recent rise in consumer prices, Deputy Governor Francis Dakila said
    • Bangko Sentral ng Pilipinas Governor Benjamin Diokno was discharged from hospital amid his steady recovery from a medical procedure
    • The Philippines is nearing a deal with Moderna Inc. for as much as 20 million vaccine doses as it monitors a post-holiday spike in coronavirus cases outside Manila
  • Taiwan approved $5.9 billion of investments in China last year, 41.5% higher than in 2019
    • December export orders rose 38% year-on-year to a record $60.6 billion
    • Eight foreign grain firms’ Taiwan units engaged in currency speculation by deliverable forwards trading totaling $11 billion as of July 2020, according to Taiwan’s central bank

EMEA:

  • The Kremlin played down nationwide protests demanding the release of jailed opposition leader Alexey Navalny -- Russia’s biggest since at least 2018 -- as Western governments condemned the detention of thousands of demonstrators

    • Currency forecasters surveyed by Bloomberg are betting that a global economic recovery and higher demand for risky assets will help the Russian ruble strengthen beyond 70 per dollar
    • President Joe Biden will seek a five-year extension of the New Start arms control treaty with Russia, reversing the Trump administration’s hard-line stance in negotiations
  • Turkey attracted record demand for its first Eurobond sale of the year, raising $3.5 billion via a two-part offering of dollar-denominated securities

    • Biden’s pick to lead the State Department said the U.S. would decide whether more steps need to be taken against Turkey once it determines the impact of sanctions already imposed over Ankara’s acquisition of a Russian missile system
    • Turkish investors couldn’t ignore the gains by their local currency since President Recep Tayyip Erdogan shook up his economic management, selling a sizable amount of their foreign-exchange deposits for the first time since October
    • Erdogan said he is “absolutely” against high interest rates
  • Poland’s MBank SA is finally facing up to potential losses from a legal battle over Swiss-franc loans in a sign of accumulating pain for the country’s financial industry
    • PKO Bank Polski SA is setting up a specialized fund to help with coal-dependent country’s transition to clean sources of energy
  • Ukraine is in talks with the International Monetary Fund to extend its $5 billion aid program as the government needs more time to meet the lender’s conditions, according to a person familiar with the discussions
  • Hungary became the first nation in the European Union to purchase Russia’s Covid-19 vaccine, buying 2 million doses
  • South African inflation slowed for a second month, moving closer to the bottom of the central bank’s target range
    • The country’s genomic scientists have found the new coronavirus variant driving the resurgence of new cases is about 50% more transmissible than earlier versions
    • South Africa’s regulator granted the health department permission to distribute the vaccine from AstraZeneca Plc and the University of Oxford in its first nod for Covid-19 inoculations
    • Almost 10 months after the first coronavirus case was detected in South Africa, the official death toll of those diagnosed with the disease has breached the 40,000 mark
    • The nation may be forced to revise its tax increase targets as its budget shortfall is set to breach wartime levels for a second consecutive year
  • Zimbabwe’s government scaled down operations amid a second wave of coronavirus infections, with only 10% of its workers available in offices until Feb. 5
  • Nigeria will struggle to attract the investment it needs to drive recovery if authorities fail to address negative returns on financial assets, an adviser to President Muhammadu Buhari said
    • The country expects to take delivery of its first coronavirus vaccine doses in February, with health workers, top government officials and vulnerable people to be given priority
  • The sale of additional stakes in already publicly traded state-owned Kenyan companies is expected to climb as much as 300 billion shillings ($2.7 billion), according to the head of the bourse
    • The Nairobi Securities Exchange plans to expand the Kenyan market with four publicly traded companies and as many corporate bonds in 2021
    • Kenya plans to invest $30 billion over the next five years to boost its industrial capacity under a United Nations-backed program
  • Glencore Plc has agreed to sell its stake in Mopani Copper Mines Plc to the Zambian government for $1.5 billion, but will get just $1 upfront
  • Mauritius will use its first 100,000 Covid-19 vaccines to inoculate 50,000 frontline workers as part of a plan the government says will contribute to a revival of crucial industries
  • Ugandan opposition leader Bobi Wine faces a daunting challenge as he seeks to overturn President Yoweri Museveni’s victory
  • Dubai ordered hotels and restaurants to halt entertainment activities and asked hospitals to cancel elective surgeries following a record daily surge in coronavirus cases
  • Bahrain sold $2 billion of bonds, taking advantage of investors’ appetite for yield as it seeks to plug one of the widest budget deficits in the region
  • Saudi Arabia plans to provide long-term loans to listed companies as part of efforts to encourage private sector firms to float their shares on the kingdom’s stock exchange
  • Iraq is in talks with the International Monetary Fund for a $6 billion loan to prop up its ailing economy
  • The United Arab Emirates has now administered more than two million coronavirus vaccine doses as it tries to emerge from the pandemic that has ravaged the key tourism industry
    • UAE’s cabinet approved a strategy that will help the second-biggest Gulf economy start a bond market in its dirham currency

Latin America:

  • Brazil’s economic activity slowed in November as the government pared back emergency cash handouts to informal workers amid the coronavirus pandemic
    • Brazilian protesters took to the streets to call for President Jair Bolsonaro’s impeachment as his administration faces criticism over a slow coronavirus vaccination roll-out and a surging death toll from the pandemic
    • Bolsonaro, Latin America’s biggest adherent of Donald Trump’s fiery brand of politics, tried to bury the hatchet with Joe Biden on his first day in the White House
    • While Brazil had a late start to its vaccination campaign, Sao Paulo is now leading the charge, giving out almost 25,000 doses in the five days since the health regulator cleared two vaccines for emergency use
    • China’s Embassy in Brazil is in contact with Brazilian authorities and will make every effort to boost exports of vaccine supplies to Brazil
    • Senators are likely to consider a new round of financial help for vulnerable Brazilians as soon as a new head of the upper house is elected in February
  • Mexican President Lopez Obrador said the central bank’s concerns should be taken into account in a bill the monetary authority has warned could force it to buy illicit dollars from local banks

    • The nation’s Covid-19 vaccination drive will be interrupted for two weeks as Pfizer, its sole provider so far, pauses shipments to adjust its production worldwide
    • Twitter Inc. rebuffed a claim by the president that the social media giant is biased against his administration in a series of tweets posted to the Twitter Mexico account
    • Mexico’s annual inflation accelerated more than expected at the beginning of the year as the central bank considers resuming its cycle of interest rate reductions
  • Chile raised about $4.25 billion in euro and U.S. dollar markets, including the biggest sustainability bond issued by a Latin American sovereign in foreign debt markets
  • Venezuela warned foreign oil companies including Chevron Corp. and Repsol SA that their licenses are at risk unless they help the OPEC nation reverse a historic slump in output, according to people familiar
    • The country’s banking regulator Sudeban issued a notice informing all banks that they are prohibited from offering loans in foreign currency in any form without authorization
  • Argentina won’t need a new version of the emergency paycheck relief program it implemented last year amid the pandemic, according to a senior government official, removing a threat hanging over the country’s weakened fiscal position

    • Investment firms are organizing into two groups to negotiate after Argentina’s YPF proposed a debt swap that would saddle them with losses
    • An ally of Argentina’s Vice President Cristina Fernandez de Kirchner, who nationalized YPF nearly a decade ago, is poised to take over as chairman as the state-run oil driller and refiner restructures its debt
    • U.S.-traded shares for YPF SA bounced back after Argentina’s Economy Minister moved to quash speculation that the government would fully nationalize the state-run energy company
  • Panama’s government tapped the global bond market for $2.45 billion one day after securing a $2.7 billion credit line from the International Monetary Fund, as it looks to lock in low borrowing costs
  • Hundreds of Honduran migrants trying to reach the U.S. have been deported by Guatemala following clashes with security forces over the weekend
  • IMF reached a staff level agreement with Costa Rica on a three-year, $1.75 billion extended fund facility, the fund said in a statement
  • Ecuador vaccinated medical staff and senior citizens at several locations as it began to use its first 8,000 Pfizer Inc.-BioNTech SE vaccines
Upcoming data and economic releases:
  • For Asia, click here
  • For Eastern Europe, click here
  • For Latin America, click here

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