EM Review: Assets Were Mixed as Traders Assessed Growth Outlooks

(Bloomberg) -- Emerging-market currencies declined last week after weaker-than-expected European activity data revived concerns about the outlook for global growth, despite stronger Chinese numbers published days earlier. Stocks, on the other hand, advanced for a third straight week in the same week.

Read here, our emerging-market weekly outlook piece.

The following is a roundup of emerging-markets news and highlights for the week through April 21.

Highlights:

• German manufacturing remained in a slump at the start of the second quarter, adding to concern over a global slowdown
• Senior U.S. and Chinese officials are scheduling more face-to-face trade talks in an effort to reach a deal by early May that President Donald Trump and his Chinese counterpart Xi Jinping could sign later that month, two people familiar with the plans said
• China’s economy grew more than expected in the first quarter, offering the government more room for maneuver as trade negotiations with the U.S. enter a crucial stage
• Ukraine’s most-watched comedian won a landslide victory in Sunday’s presidential runoff, an exit poll showed. Volodymyr Zelenskiy, a 41-year-old TV comic who’s tapped into fury at the political class, got 73 percent of ballots compared with 26 percent for incumbent Petro Poroshenko
• Turkish President Recep Tayyip Erdogan’s opponents were officially declared the winners in Istanbul’s local election, while the authorities consider the governing party’s claim of fraud and its demand for a fresh vote
  • The lira fell after a report suggesting the nation’s central bank had used short-term borrowing to support foreign-currency reserves
  • READ: Why Is Everyone Worried About Turkey’s Foreign Reserves?
• North Korea demanded that U.S. Secretary of State Mike Pompeo be removed from direct nuclear negotiations between the countries, turning up pressure after the collapse of a summit between Kim Jong Un and Trump in February
  • Just hours before KCNA quoted the foreign ministry blasting Pompeo, it said in a separate report that North Korea had tested a “new-type tactical guided weapon"
• Unofficial results showed Indonesia’s incumbent Joko Widodo defeating Prabowo Subianto by a comfortable margin, setting him up for his second term as president of the world’s third-largest democracy. The official result will be announced in May
  • Widodo has claimed victory, citing unofficial quick count results and setting the stage for a potential legal battle with Prabowo who’s disputed the tally
• More than 200 people died in coordinated blasts on Easter Sunday at churches and luxury hotels in Sri Lanka, some of which involved suicide bombers. As many as 30 foreigners were among dead, official said

ASIA:

• China’s central bank shifted its tone on the economy, emphasizing that it will control excessive money supply amid signs of a recovery
  • A debt crisis at one of China’s most well-known private conglomerates entered a new stage, with the company saying cross-default clauses had been triggered on dollar bonds worth $800 million
• FTSE Russell may drop Malaysian debt from the FTSE World Government Bond Index as part of a review into the accessibility of global bond markets
• India’s trade deficit widened in March from the month before, as a rebound in oil prices raised the cost of imports
• South Korea’s central bank cut its economic growth and inflation forecasts and left its key interest rate unchanged
• The Philippines posted a balance of payments surplus of $627 million in March, wider than the $467 million surplus in February. Filipinos living overseas sent home $2.3 billion in February, up 1.5 percent from a year ago

EMEA:

• After Saudi Arabia’s Aramco managed to raise $12 billion at lower yields than the kingdom itself, investors are paying the price. All five maturities have fallen since trading started, in some cases by more than 2 cents on the dollar
  • Saudi Arabia and the United Arab Emirates said they’ll extend $3 billion in aid to Sudan after the ouster of long-time President Omar al-Bashir this month
• Egypt’s long-term foreign debt rating was upgraded by Moody’s to B2 from B3
  • Egyptians will begin voting on Friday in a national referendum on constitutional changes that would allow President Abdel Fattah El-Sisi to stay in power as long as 2030, the country’s Supreme Elections Commission announced
• Russia raised $1.3 billion in a single bond sale, more money than in the whole month of January, as concern about sanctions fades into the background
  • The nation has received a debt payment from Venezuela under the terms of a $3.15 billion restructuring deal agreed to in 2017
• Threats by authorities in the U.S. that they will impose so-called CAATSA sanctions if Turkey goes ahead with its decision to purchase S-400 missiles from Russia will “backfire,” President Erdogan’s spokesman Ibrahim Kalin said
• Poland plans to overhaul its pension system in a way that ends uncertainty over the future of assets managed by privately-held pension funds and helps the government avoid widening the budget deficit
• Index-provider FTSE Russell said Israel now meets the criteria for joining its World Government Bond Index, and if the country still passes that threshold in a September review, it will be added
  • The Bank of Israel said it will consider intervening in currency markets if the shekel continues appreciating, an obstacle to its plans to raise interest rates because it’s complicating inflation’s return to the midpoint of the government’s target range
• Lebanese Prime Minister Saad Hariri warned that the country’s economy is at risk of collapsing and pledged to enact the toughest belt-tightening measures the nation has ever known
• Nigerian Finance Minister Zainab Ahmed said the government is in talks with the World Bank for a $1 billion loan to develop the power sector, Lagos-based ThisDay newspaper reported
• Zimbabwe’s inflation rate increased for a 10th straight month in March as the prices of food and personal-care items surged
• South Africa’s central bank said it’s premature to claim victory in the war against inflation and sees price growth stabilizing at 4.5 percent only by the end of 2021
  • The tension created by high levels of inequality in South Africa increases political risk and hampers the progress of economic reforms, Moody’s Investors Service said
• Oman’s long-term foreign currency debt rating was affirmed by S&P at BB, two levels below investment grade, but its outlook was changed to negative from stable

Latin America:

• Argentina’s central bank announced it will hold its currency band at current levels until the end of the year, halting a policy of gradual depreciation, after annual inflation accelerated to 54.7 percent in March
  • Central bank will now aim to keep the currency trading between 39 and 51 pesos per dollar until the end of the year and said it will no longer buy dollars if the peso strengthens to outside of the band
• Brazil’s pension reform proposal suffered a setback on Wednesday after a legislative committee tried and failed to vote on the bill that’s heavily backed by investors
  • The move comes after centrist parties sought changes to several parts of the bill even after hours of debate
  • Analysts cut growth estimates for this year and the next, while a key measure of activity fell short of forecasts in fresh signs of headwinds for the economy
  • Economy Minister Paulo Guedes said Petrobras is independent to decide on its fuel-pricing policy as he attempted to allay concern after the oil producer backtracked on a diesel price increase due to pressure from President Jair Bolsonaro
• Former Peru President Alan Garcia, who was suspected of receiving bribes in a continent-wide corruption scandal, shot and killed himself as police attempted to detain him
  • Government is considering increasing the fiscal deficit target to open room for more infrastructure investment, the finance minister said
• Chile’s central bank signaled it will keep interest rates unchanged for several meetings, according to the minutes of the last meeting
• Mexico’s economic deceleration has become more widespread, Banxico deputy governor Javier Guzman said

--With assistance from Yumi Teso, Philip Sanders, Ben Bartenstein, Dana El Baltaji, Netty Ismail, Selcuk Gokoluk and Colleen Goko.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net;Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Karl Lester M. Yap, Alex Nicholson

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