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Emerging Stocks Ride Out Mixed Trade Truce Signals: EM Review

(Bloomberg) -- Emerging-market stocks defied mixed signals on the outlook for a U.S.-China trade deal, rallying for a fifth straight week. Equities gained momentum Friday on speculation that the arrival of a Chinese delegation in Washington could pave the way for an agreement.

The following is a roundup of emerging-markets news and highlights for the week ending Jan. 27.

Asset Moves Weekly
MSCI EM stocks index+1.4%
MSCI EM FX index+0.2%
Bloomberg Barclays Global EM Local Currency bond index  +0.2%

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  • President Donald Trump agreed to re-open the federal government for about three weeks without any guarantee Congress would provide money for the proposed border wall -- his top campaign promise
    • Congress voted to reopen federal agencies through Feb. 15 and end the 35-day partial government shutdown
  • The International Monetary Fund cut its forecast for global growth, predicting it would expand at the weakest pace in three years in 2019 and warning fresh trade tensions would spell further trouble
  • U.S. Commerce Secretary Wilbur Ross said the U.S. and China are eager to end their trade war, but the outcome will hinge on whether Beijing will deepen economic reforms and further open up its markets
    • Earlier in the week, Trump’s top economic adviser said the scope of U.S. trade talks with Beijing is broader and deeper than ever before, but a final outcome would ultimately depend on verification of Chinese commitments
    • The U.S. is pushing ahead with efforts to get Canada to extradite a top Huawei Technologies executive, the Justice Department said, in a case that has added to trade tensions with China
    • Canadian Prime Minister Justin Trudeau has ousted his ambassador to China in the middle of a diplomatic feud with Beijing after a string of public remarks drew criticism
  • China’s economy expanded at the slowest pace since the global financial crisis in the fourth quarter, as a domestic financial clean-up, weakening global demand and the trade conflict with the U.S. all damped momentum
  • Venezuela’s bonds climbed as President Nicolas Maduro came under unprecedented pressure after the U.S. and other nations recognized opposition leader Juan Guaido as the country’s rightful head of state, amid hopes a new administration would bolster oil production and kick-start economic growth
    • A new leader could also open the way for a bond restructuring agreement after the government and state-owned oil company fell behind on $9 billion of payments
  • Lebanon’s dollar bonds rallied after Qatar said it plans to buy $500 million of Lebanese debt and Saudi Arabia vowed less than a day later to support one of the world’s most indebted nations “all the way”
  • A tailings dam owned by Brazilian miner Vale SA broke in the state of Minas Gerais on Friday, hitting a local community near the capital and echoing a similar accident that became the nation’s biggest environmental disaster three years ago


  • Chinese President Xi Jinping stressed the need to maintain political stability in an unusual meeting of China’s top leaders
    • The nation will continue efforts to realize its goal of achieving “decisive results” in reforms of key areas by 2020, Xi said, according to Xinhua News Agency
    • Vice President Wang Qishan said the nation has delivered “significant” growth and pledged to the World Economic Forum in Davos, Switzerland, that it won’t falter
  • South Korea’s gross domestic product expanded 1 percent in the fourth quarter from the previous three months, versus economists’ median estimate of 0.6 percent
    • The central bank kept its benchmark interest rate unchanged at 1.75 percent as expected and predicted domestic economic growth would fall slightly short of the path projected in October
    • President Moon Jae-in may replace two ministers in a Cabinet reshuffle that could take place around end-February or early March, Munhwa Ilbo newspaper reports, citing an unidentified presidential official
  • U.S. officials are planning for Trump to hold his second summit with North Korean leader Kim Jong Un next month in Vietnam, people familiar with the plans said
  • IMF’s Chief Economist Gita Gopinath flagged concerns about India’s high fiscal gap
    • Additional annual expenditure for the federal government on full roll out of the farmers’ relief program likely to be about 700 billion rupees ($9.8 billion) annually, people familiar with the matter said
    • India is considering offering inexpensive loans and free accidental insurance coverage to millions of small businesses, Reuters reported, citing two unidentified people in the government with knowledge of the matter
  • Indonesia’s benchmark stock index rose to its highest since March; the policy rate is near its peak as Federal Reserve is seen slowing the pace of rate hikes, however a rate cut may still be difficult, according to central bank Governor Perry Warjiyo
    • Finance Minister Sri Mulyani Indrawati said she was prepared to reimpose higher taxes on imports to keep the ballooning trade deficit in check if the country was unable to boost exports
  • Thailand’s SET Index of shares posted its biggest weekly rally since early November as the nation said it will hold a general election on March 24 for the first time since a coup in May 2014
    • Deputy Prime Minister Somkid Jatusripitak said he expects 2019 GDP growth to be higher than the World Bank’s forecast of 3.8 percent
    • Exports dropped 1.7 percent in December on year versus estimated 0.2 percent fall. The government attributed decline to fallout from the trade war
  • Philippine economy grew 6.2 percent in 2018 after a 6.7 percent increase the year before, missing the government’s revised target of 6.5 percent-6.9 percent
    • The country is keeping its 7 percent-8 percent growth target for 2019, Economic Planning Secretary Ernesto Pernia said
  • Malaysia’s central bank left its policy rate unchanged at 3.25 percent as expected
    • Consumer prices increased 0.2 percent on year in December, less than estimated 0.3 percent gain and same pace as the previous month
  • Taiwan’s export orders fell the most in almost three years in December in the latest warning sign for global trade; industrial production unexpectedly decreased 1.2 percent in December from a year earlier, compared with a 0.4 percent forecast gain


  • Saudi Aramco sent a request for proposals to banks for its first-ever international U.S. dollar bond and loan to finance the acquisition of petrochemical giant Sabic, according to people familiar with the matter
  • Romania’s currency touched a record low against the euro after suffering its biggest one-day loss in more than five years. It later pared the losses, but it’s still the worst-performing EM currency this year on investor concern over a tax on bank assets
  • Rebounding oil and receding sanctions jitters have helped make the ruble the best-performing currency globally this year
    • Russian 2018 budget surplus reaches 2.7 percent of GDP, largest since 2008
  • Turkey tapped the international bond market for the second time in as many weeks, capitalizing on buoyant demand for riskier debt and growing confidence in policy makers’ ability to steer the economy
    • Turkey’s economy is on track for a soft-landing in line with the government plan after a currency crash last year, Treasury and Finance Minister Berat Albayrak said in an interview
  • South Africa’s inflation rate reached the mid-point of the central bank’s target range of 3 percent to 6 percent in December. Consumer-price growth slowed to 4.5 percent from a year earlier compared with 5.2 percent in November.
  • Poland’s finance minister said the country is financially ready for Brexit whether it happens with or without a deal with the European Union
    • Poland is ready for its third green bond sale, cementing its position as one of the most prolific issuers of such debt in the world
  • Zimbabwean President Emmerson Mnangagwa dismissed rumors that a coup is being planned after a week of often violent protest against massive fuel price increases in the southern African nation, his spokesman said
  • Kenya is in discussions with lenders on whether to issue $2.5 billion of eurobonds in dollars or euros
  • Nigerian President Muhammadu Buhari’s suspension of the nation’s top judge just weeks before a general election drew condemnation from opposition leaders and the legal community, while the U.S. and European Union said it could undermine the vote

Latin America:

  • The Mexican peso posted its ninth weekly gain as inflation unexpectedly slowed in the beginning of 2019 after the currency strengthened and oil prices fell
    • Consumer prices rose 4.52 percent in the first two weeks of January from a year ago, less than the 4.67 percent forecast by analysts in a Bloomberg survey
    • A bill seeking to cut Mexico’s bank fees may be sent to a vote next month, according to Senate leader Ricardo Monreal
  • Colombia joined a rush of emerging-market bond sales, successfully selling $500 million more of its dollar bond due 2029 paying a yield of 4.45 percent, and $1.5 billion of debt due 2049 to yield 5.22 percent
    • This was the first test of investor appetite for the nation’s investment-grade debt since congress blocked the government’s tax raising plans last year
  • Brazil’s Economy Minister Paulo Guedes laid out bold targets for selling off state assets and balancing the budget
    • New government has what it takes to implement the policies eagerly sought by global investors, President Jair Bolsonaro said in a speech at the World Economic Forum
    • A probe into possible financial irregularities involving Bolsonaro’s eldest son raised doubts with his supporters
    • Mid-January inflation came in below market expectations for a fifth month
  • Argentina’s central bank may increase the amount of dollars it buys on a daily basis if the recent gain in the peso continues and the currency remains outside a trading range set in a deal with the IMF
  • Maduro’s embattled Venezuelan regime was stymied in its bid to pull $1.2 billion worth of gold out of the Bank of England, according to people familiar with the matter
    • Venezuela abandoned its decision to sever diplomatic ties with the U.S.
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