Emerging Markets Retreat Amid Global Growth Concerns: EM Review

(Bloomberg) -- Emerging-market assets retreated last week amid lingering threats to global growth, even as reports suggested the U.S. and China had reached consensus on the main topics in their trade talks on Friday. Currencies posted their worst weekly slide since mid-December, while stocks deepened their monthly decline.

Asset Moves Weekly
MSCI EM stocks index-0.5%
MSCI EM FX index-0.6%
Bloomberg Barclays Global EM Local Currency bond index -0.4%

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  • The U.S. and China are said to have reached a consensus in principle on the main topics in their ongoing trade negotiations, with talks set to resume in Washington
    • President Donald Trump had earlier hailed progress and said he may extend a tariff truce and take steps to sell a potential deal to opposition lawmakers
    • The Trump administration said the U.S. president still wants to meet China’s Xi Jinping in an effort to end the trade war
    • Trump planned to meet with members of his trade team on Saturday for an update on ongoing talks with China, the White House said
  • Trump said he’ll declare a national emergency on the U.S. southern border in a bid to unlock more money to build his proposed wall
  • India’s inflation eased to a 19-month low in January, helping justify the central bank’s decision to lower interest rates and opening the door to further cuts. Consumer prices rose 2.05 percent from a year earlier, below the 2.5 percent median estimate
  • A bipartisan group of senators introduced legislation to punish Russia for interfering in U.S. elections and for exerting “malign influence” in Syria and its aggression in Ukraine, setting up a potential clash with President Trump
  • The rand was the worst performer among emerging currencies as South Africa’s biggest labor group staged a nationwide protest against job losses Wednesday, the latest setback for an economy reeling from days of rolling power cuts
  • Nigeria’s electoral commission delayed the nation’s general elections by a week, reinforcing the opposition’s criticism that state institutions under President Muhammadu Buhari aren’t independent or competent enough. The announcement came hours before polls were due to open on Feb. 16
  • Saudi Aramco picked JPMorgan Chase & Co. and Morgan Stanley to manage its first-ever international dollar-bond sale to fund the acquisition of petrochemical giant Sabic, according to people with knowledge of the matter
  • Brazil’s government said it would present proposals to raise the minimum retirement age for women to 62 and for men to 65, triggering a rally in share prices. Proposal to be sent to Congress on Feb. 20
  • Mexico’s President Andres Manuel Lopez Obrador said the government will expand tax breaks for the state-owned oil producer Pemex, while the company will refrain from issuing new bonds this year and begin prepaying existing liabilities as part of a broad turnaround plan
  • Argentine inflation unexpectedly accelerated in January with prices rising 2.9 percent from the previous month, compared with the 2.5 percent medium estimate


  • China’s credit growth exceeded expectations in January amid a seasonal lending surge. Aggregate financing was 4.6 trillion yuan ($685 billion), compared with the 3.3 trillion yuan medium estimate in a Bloomberg survey
    • Two large Chinese borrowers are said to have missed payment deadlines this month. China Minsheng Investment Group Corp. hasn’t returned money to bondholders that it had pledged to pay on Feb. 1, according to people familiar with the matter. Wintime Energy Co., which defaulted last year, didn’t honor part of a restructured debt repayment plan, separate people said
    • Export growth unexpectedly rebounded in the first month of 2019, while imports fell. Shipments increased 9.1 percent from the year earlier and imports slid 1.5 percent, leaving a trade surplus of $39.2 billion
    • The producer-price index rose 0.1 percent in January from a year earlier, the seventh straight month it has slowed; consumer price inflation also eased, rising 1.7 percent from a year earlier
  • A member of the Bank of Korea’s policy board said external uncertainties have risen while the economy is slowing and inflation remains low, according to minutes from the Jan. 24 meeting
    • Recent economic indicators show U.S.-China trade tensions are having a negative impact on both countries as well as South Korea, Bank of Korea said
    • North Korean leader Kim Jong Un will travel to Hanoi around Feb. 25 for a state visit, South Korea’s JoongAng Ilbo newspaper reported, citing an unidentified person
    • The U.S. envoy to North Korean nuclear talks said it would be hard to resolve remaining disputes before Trump’s upcoming summit with Kim, according to a South Korean lawmaker
  • Bank of Thailand Governor Veerathai Santiprabhob said the bank is closely monitoring the currency and ready to act on any excessive movements
    • The Constitutional Court accepted a case calling for the party Thai Raksa Chart, to be dissolved for hostility toward the constitutional monarchy; the accusation reached the court five days after King Maha Vajiralongkorn sunk the party’s bid to make his sister a candidate for prime minister in the March 24 election
  • India’s parliament ended its final session as Prime Minister Narendra Modi’s government prepared to go to the polls by May
    • Dozens of Indian security forces were killed in the disputed region of Kashmir in the most serious terrorist attack to occur since Modi came to power in 2014
    • India raised duties on all goods imported from Pakistan
    • The country’s trade deficit widened in January as a rebound in oil prices weighed on the nation’s import bill
  • Malaysia’s economy grew faster than expected in the fourth quarter, buoyed by exports and strong consumer spending. Gross domestic product rose 4.7 percent from a year ago, compared with a median estimate of 4.5 percent
    • The country will sell 200 billion yen ($1.8 billion) in Samurai bonds in March at a maximum coupon rate of 0.65 percent, Finance Minister Lim Guan Eng said
  • Philippine exports decreased 12.3 percent in December from a year earlier, while imports fell 9.4 percent, leaving a trade deficit of $3.8 billion
  • Taiwan’s government cut its 2019 GDP growth forecast to 2.27 percent from 2.41 percent


  • Saudi Arabia is to end advice warning its citizens against traveling to Lebanon
  • Qatar is weighing plans to tap international bond markets as the gas-rich nation seeks to cement its status as a regular issuer, according to three people with knowledge of the matter
  • Egypt’s central bank unexpectedly cut the benchmark deposit rate by 100 basis points to 15.75 percent as inflationary pressures ease and inflows recover from last year’s rout in emerging markets
  • Ghana’s inflation rate dropped to a record low in January, giving the central bank more room to continue loosening policy. Consumer prices increased 9 percent from a year earlier, compared with 9.4 percent in December
  • Namibia’s central bank left its key interest rate unchanged at 6.75 percent and said that the economy will probably expand in 2019 after two straight years of contraction
  • Uzbekistan emerges from isolation with its first sale of $1 billion in international debt markets
  • Russia held its biggest ruble debt auction in almost a year after the Finance Ministry dropped a formal issuance target
  • Turkey posted a current-account deficit in December after running a surplus for four straight months, in a sign that a sharp improvement after last year’s currency crash may be losing steam
    • The central bank changed its reserve rules to boost credit growth amid signs of a deepening slowdown in the Middle East’s largest economy.
      The lira reserve-requireme

Latin America:

  • President Jair Bolsonaro gave the green light to a proposal to overhaul Brazil’s unsustainable pension system that includes minimum retirement ages and substantial savings to public coffers
    • Pension reform talks come as the president suffers his first cabinet crisis over a campaign financing scandal involving one of his sons
    • Central bank members said in the minutes of their most recent meeting that a faster economic recovery depends on clearer signs that the government’s pro-business agenda will be approved
    • Retail sales fell the most in three years in December, supporting the case for the central bank to further ease borrowing costs
  • Concern about Mexico’s outlook mounted, with Bank of America Merrill Lynch saying 68 percent of investors in a survey see the country losing its investment-grade rating, up from 41 percent before the Pemex downgrade last month
    • Industrial production dropped 2.5 percent in December from a year ago, more than the 1.6 percent slide expected by economists
  • The Argentine peso slipped back into the central bank’s non-intervention zone after the central bank limited bank holdings of Leliq notes, aiming to curb swings in financial flows. and inflation accelerated
  • Venezuela’s oil minister and head of PDVSA Manuel Quevedo was sanctioned by the U.S. Treasury Department along with four other officials for their ties to President Nicolas Maduro
    • The International Monetary Fund is said to be preparing a massive financial aid package to help get Venezuela back on its feet once Nicolas Maduro’s regime is gone
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