EM Review: Risk Assets Posted Worst Week Since March Meltdown

Emerging-market stocks and currencies posted their biggest weekly decline since March last week amid a resurgence in global coronavirus cases, pessimistic comments from Federal Reserve officials, and delays to further U.S. fiscal stimulus. Central banks in Hungary and Turkey unexpectedly raised interest rates after their currencies weakened, while authorities in Mexico, Colombia and Egypt reduced borrowing costs.

The following is a roundup of emerging-market news and highlights for the week through Sept. 27:

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


  • Fed Chair Jerome Powell said the U.S. economy has a long way to go before fully recovering from the coronavirus pandemic and will need further support
    • A parade of Fed officials stressed that more fiscal stimulus is critical
    • The U.S. central bank’s new guidance on interest rates doesn’t preclude tightening before inflation averages 2% for some period of time, Chicago Fed President Charles Evans said
  • A last-ditch attempt by Democrats and the White House to restart negotiations on a new stimulus drew skepticism in Congress that a deal could be reached and written into law by election day
  • Doubts emerged earlier in the week about Oracle’s deal to take over TikTok as President Donald Trump said he may still renege on his approval and the Chinese government signaled its reluctance
    • Two of China’s most prominent state-backed media mouthpieces denounced the deal
    • The Trump administration was ordered to postpone a U.S. ban on TikTok set for Sunday or respond by Friday to a request by the app’s Chinese owner for a court order temporarily blocking the ban
  • Chinese President Xi Jinping took a veiled swipe at the U.S. in a strongly worded speech
    • China slammed the passage of a forced labor bill in the U.S. House of Representatives that would ban imports from Xinjiang
  • An $18 billion initiative to deploy future Covid-19 vaccines around the world is moving into the next phase with 156 countries and regions taking part in the program, but China is joining the U.S. on the sidelines for now
    • Chinese vaccine developer Sinovac Biotech said countries running its final-stage clinical trials like Brazil, Indonesia and Turkey will get its coronavirus shots at the same time as China
    • The world will officially record 1 million deaths from Covid-19 in the next few days, but the real tally might be almost double that
  • Turkey’s central bank raised rates for the first time since a currency crisis in late 2018, surprising most economists after a series of backdoor measures fell short of stabilizing the lira
  • Hungary’s central bank unexpectedly raised a key interest rate to arrest the forint’s slide, two days after a regular meeting where policy makers left borrowing costs unchanged
  • Mexico’s central bank cut its key interest rate by a quarter point, the least since February, in a sign the current monetary easing cycle is nearing its end after inflation sped past the target
  • Colombia cut interest rates to a record low in a split decision after inflation slowed below its target and the weak recovery left a quarter of urban workers unemployed
  • Egypt’s central bank unexpectedly lowered interest rates for the first time since an emergency cut in March as the focus moves from luring more debt investment to supporting economic growth
  • The Bank of Thailand held its benchmark rate unchanged for a third meeting to save its limited policy space
  • The Czech central bank kept borrowing costs unchanged, letting a weakening currency help the economy as the country sinks deeper into the coronavirus crisis
  • Chinese sovereign bonds have won inclusion into FTSE Russell’s benchmark bond index a year after they were rejected

    • FTSE added Russian equities to its watchlist for possible upgrade to advanced emerging-market status from secondary. Argentina’s stocks status changed to unclassified; Malaysia kept on watchlist for exclusion from bond index
Asset movesWeekly
MSCI EM stocks index-4.5%
MSCI EM FX index-1.3%
Bloomberg Barclays global EM local currency bonds index-1.4%


  • China jailed outspoken property tycoon Ren Zhiqiang for 18 years on graft charges, months after he was linked to an article criticizing President Xi’s handling of the coronavirus outbreak
    • Chinese companies are selling a record amount of investment-grade dollar bonds this quarter
    • The People’s Bank of China injected a total of 350 billion yuan ($51 billion) into the banking system, the biggest net injection of short-term funds since February
    • China detected its first local asymptomatic infections in more than a month as two port workers responsible for unloading frozen seafood tested positive
    • August profit for Chinese industrial companies was 612.8 billion yuan ($89.8 billion), China’s National Bureau of Statistics said
  • South Korea’s early trade data showed exports rebounding in September, buoyed by more work days and growing demand for cars and semiconductors

    • The country will strengthen social distancing rules for Chuseok holidays
    • Regulators are sounding an alarm over a surge in individual investors’ exposure to foreign stocks
    • Parliament approved a 7.8 trillion won ($6.7 billion) extra budget, the fourth spending increase this year
    • The nation is expected to see a record number of so-called “zombie” companies this year, the central bank estimated
    • Kim Jong Un apologized over the fatal shooting of a South Korean national by North Korean military personnel north of the border, a gesture that may help ease a new source of tension between the two rivals.
    • Consumer confidence slipped for the first time in five months as a jump in virus cases and tighter social restrictions made households more pessimistic about the economy’s outlook
  • Eight opposition lawmakers in India’s upper house of parliament were suspended for a week for unruly behavior
    • Small businesses in India, already struggling amid the pandemic, are now having to repay mounting debt after a loan holiday ended last month
    • China and India have agreed to stop sending troops to the front line of their disputed Himalayan border
    • India’s parliament approved a set of long overdue labor legislations that aim to attract investment and make it easier for companies to do business
    • India’s eastern state of Bihar will go to polls in October and November, an election that’s viewed as a test of Prime Minister Narendra Modi’s popularity
  • Indonesia’s economy is set to contract for the first time since the Asian financial crisis
    • Indonesia’s capital is adding thousands of beds to house Covid-19 patients as its health system struggles with record increases in virus cases
    • Jakarta will extend stricter movement restrictions for another 14 days
    • The draft bill to overhaul Bank Indonesia’s mandate was said to be prompted by a broader request from President Joko Widodo
  • Thailand’s cabinet approved measures to prop up domestic consumption by expanding cash assistance programs to low-income group and declaring additional holidays
    • Thailand received no foreign tourists for a fifth month
    • Thai lawmakers failed to reach an agreement on a pathway to amend the constitution, further angering anti-government demonstrators calling for more democracy and reform of the monarchy
  • Malaysia’s king plans to hold an audience with opposition leader Anwar Ibrahim soon to give him the opportunity to prove he had majority support to form a government
    • The country unveiled additional 10 billion ringgit ($2.4 billion) in measures to boost economy
    • Consumer prices fell 1.4% in August from a year earlier versus a median estimate of 1.3% decline
  • Philippine central bank Governor Benjamin Diokno said loose monetary policy “will be on the table for the next maybe 2 years”

    • After years of shifting the Philippines closer to China, President Rodrigo Duterte appears to be leaning back toward the U.S.
    • Consumer confidence fell to a record in the third quarter, while the financial condition of businesses worsened and access to credit tightened, according to the central bank
  • Laos had its credit rating cut deeper into junk to CCC from B- by Fitch Ratings
  • Pakistan’s central bank left its key rate unchanged amid signs of momentum returning to the economy as coronavirus cases abate


  • Turkey and Greece will resume talks aimed at resolving territorial disputes in the Eastern Mediterranean, after a naval standoff over the summer brought the two countries close to the brink of conflict
  • Russia’s deputy economy minister is worried the economy’s consumer-led recovery isn’t fully cemented as the government prepares to wind back stimulus

    • Yandex NV, Russia’s largest Internet company, is in talks to buy TCS Group Holding Plc for about $5.48 billion to expand in financial services
    • Russian opposition leader Alexey Navalny could make a full recovery from his poisoning by weapons-grade nerve agent Novichok, according to doctors at the Berlin clinic where he was treated before his discharge
  • Hungary’s central bank stepped up its warning that it’s ready to tackle above-target inflation, while expanding a corporate-bond buying program to help the economy recover
  • Kuwait was downgraded for the first time by Moody’s Investors Service, a decision the ratings agency said reflects the increase in the government’s “liquidity risks”
  • Oman’s government has mandated banks for its first international public bond sale in over a year, according to people familiar, as the sultanate seeks to plug its budget deficit
  • Saudi Arabia is “assessing all the options” to boost its economy after taking measures to offset a decline in oil revenue and an economic contraction, the commerce minister said
    • Saudi Arabia is preparing for a quick rebound in tourism and hasn’t revised its visitor targets for 2021 despite the coronavirus pandemic
  • The economy of the United Arab Emirates will suffer a deeper contraction this year than first estimated, according to the central bank
  • Lebanon’s president warned the country is “going to hell” if a government isn’t swiftly formed, and suggested abolishing the sectarian quotas that have long tormented cabinet-building
    • Lebanon’s prime minister-designate stepped down after failing to form a government
  • Morocco kept its benchmark rate at an all-time low, pausing a record easing cycle even as the central bank projected a deeper economic contraction as the coronavirus pandemic ravages the tourism-reliant economy

    • The economic disruptions caused by the spread of the coronavirus are exposing the limits of monetary policy in Morocco, with inflation staying below zero even after the central bank’s biggest rate cut in history
    • Morocco sold $1 billion euros ($1.2 billion) of bonds
  • Additional rate cuts won’t resolve the real problems holding back the country’s economy, South Africa’s central bank governor said
  • Angola’s Eurobonds reversed declines that drove benchmark yields to three-month highs after the country said it will honor payments on these obligations while it looks for relief from other creditors
  • The Central Bank of Nigeria unexpectedly cut its key interest rate to its lowest since 2016 as it chose to boost a contracting economy over fighting inflation
  • Zambia asked holders of its three Eurobonds totaling $3 billion to defer interest payments of almost $120 million until April

    • Fitch downgraded Zambia’s rating to C from CC
    • Inflation quickened for the first time in four months in September
  • Ethiopian officials said the security situation in the country is stabilizing after at least 160 people died in unrest following the June 29 death of a popular singer
  • The Israeli government tightened its lockdown restrictions for two weeks
  • Egypt is preparing to sell its first-ever green bond

Latin America:

  • Brazil’s central bank meeting minutes reiterated its intention to keep interest rates at a record low as a pick-up in inflation is likely to be temporary. A quarterly inflation report showed officials expect the economy to contract less than they previously forecast
    • The mid-September inflation rate rose to the highest in eight months amid increased costs for food and transportation
    • Economy Minister Paulo Guedes is trying to speed up Brazil’s tax reform agenda and is working on a tax on transactions, said two people with knowledge of the matter
    • President Jair Bolsonaro underwent surgery on Friday to remove a bladder stone
    • Rio de Janeiro’s Governor Wilson Witzel will face impeachment proceedings after the local legislature voted unanimously to hold a political trial amid an ongoing corruption probe
  • Mexican inflation stayed above the upper limit of its target range in early September
    • President Andres Manuel Lopez Obrador will consider tweaking his predecessor’s energy reform if his goals of strengthening Pemex and CFE can’t be met under current laws, according to a person familiar
    • Government will increase the amount of Mbonos and Udibonos sold in the fourth quarter of this year
    • Mexico’s Finance Ministry and banking regulator presented a new package of measures so people and businesses can restructure loans
    • July retail sales fell 12.5% from the prior year
  • Argentines are beginning to withdraw dollar deposits held at local banks after the latest round of measures to tighten capital controls

    • The country’s new dollar bonds have plunged back into distressed territory just two weeks after the nation restructured almost $65 billion in debt
    • La Rioja province is preparing a debt restructuring proposal to present to its bondholders, according to a statement
    • Argentina’s Mendoza province has reached an agreement in principle with its major creditor group, making it the first of a handful of provinces to reach a debt deal
    • International Monetary Fund staff are planning a mission trip to Argentina for early October
    • GDP fell 19.1% in the second quarter from a year earlier
  • Chile’s congress is starting to debate a proposal to allow a second round of early pension withdrawals just as the central bank rolls back measures to combat market volatility stemming from the first
  • Protests are intensifying across Venezuela over worsening shortages of everything from fuel to medicine as the pandemic aggravates the world’s longest recession

    • A European Union mission has arrived in Venezuela to talk with political leaders about ensuring fairer conditions for Dec. 6 congressional elections
Upcoming data and economic releases:
  • For Asia, click here
  • For Eastern Europe, click here
  • For Latin America, click here

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