EM Review: Risk-On Mood Lingered in Quiet Trading as Stocks Rose

(Bloomberg) -- Emerging-market stocks and currencies rose to an 18-month high last week as risk-assets headed toward 2020 on a positive note. At the end of the Christmas week, a rally in technology shares around the world gave a final boost to equities, already buoyed by the prospect of a phase-one trade deal between the U.S. and China. Underscoring the optimism, investors added a record $4.2 billion to emerging-market exchange-traded funds.

The following is a roundup of emerging-markets news and highlights for the week ending Dec. 29.

Read here our emerging-market weekly preview


  • China’s government said it will cut import tariffs for goods including frozen pork, pharmaceuticals, paper products and some high-tech components starting from Jan. 1
    • Policy makers will unveil a three-year action plan in early 2020 on the reform of state enterprises, aiming to improve the performance of the sector and create world-class industry champions, according to state-owned newspapers
    • China’s imports of U.S. soybeans rose to the highest in 20 months in November after more American cargoes cleared customs ahead of the signing of a partial trade deal in January
    • The phase-one trade agreement has created a favorable environment for an overall balanced foreign-exchange market in China in the next year, said Lu Lei, deputy head of State Administration of Foreign Exchange
  • China’s central bank ordered lenders to adopt a new loan-pricing regime for all credit from next year, marking an end to the previous benchmark and another step toward liberalizing the financial system
  • Hong Kong riot police fired tear gas at crowds in popular shopping districts on Christmas Eve in confrontations that left about two dozen people injured. Shopping malls have become a flash point for protests during the Christmas holiday
  • President Donald Trump said that if North Korea tests intercontinental ballistic missiles, the U.S. will “deal with it
    • Kim may have reconsidered his planned “Christmas gift” to the U.S. amid ongoing high-level personal diplomacy by Trump, said National Security Adviser Robert O’Brien
  • Turkey dug in over its refusal to abandon a new Russian missile defense, saying it won’t bow to threats of crippling U.S. sanctions or trade the S-400s for an American system
  • A Saudi court sentenced five people to death for the murder of government critic Jamal Khashoggi but ruled that last year’s assassination wasn’t premeditated and said it didn’t have enough evidence to incriminate two top officials close to Crown Prince Mohammed bin Salman
  • Investors added a record $4.22 billion to emerging-market exchange-traded funds in the week ended Dec. 20 as the year comes to a close in a positive mood for risk assets
Asset Moves:Weekly
MSCI EM stocks index+1.0%
MSCI EM FX index+0.3%
Bloomberg Barclays Global EM Local Currency bond index+0.5%


  • Profits at Chinese industrial enterprises rose in November as factory-gate deflation eased and domestic demand improved. Industrial profits climbed 5.4% in the month from a year earlier, after three months of declines including October’s record 9.9% slump

    • China is willing to open its financial and health-care services sectors to foreign investment, including the gradual removal of ownership limits, Chinese Premier Li Keqiang said at a summit with Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in in Chengdu
    • Of 3,200 bankers surveyed by the Chinese central bank, 15% think monetary policy is loose, 2 percentage points more than in the third quarter
    • The Ministry of Industry and Information Technology forecast 2019 industrial output growth at about 5.6%
    • Chinese policy makers will unveil a three-year action plan in early 2020 on the reform of state enterprises
    • China’s economic performance improved in December for the first time in eight months, according to a group of earliest-available indicators compiled by Bloomberg
    • China’s top legislature approved changes to the nation’s Securities Law, as it eased up listing rules and stiffened penalties for violations in the country’s $21 trillion capital market
    • READ: China’s Government Is Letting a Wave of Bond Defaults Just Happen
  • Early South Korea trade figures for December show monthly exports may decline less than 10% for the first time since May, another sign the global manufacturing slump may be ending
    • The government finalized its 2020 budget allocation plan, with a focus on increasing spending in the first half to facilitate economic recovery
    • Bank of Korea said it will strengthen its study and analysis of monetary policy tools other than interest rates
    • The leaders of Japan and South Korea signaled they wouldn’t let relations spin out of control even as they made little progress in resolving disputes that have plagued relations
  • India needs to consolidate its finances by curbing expenditure and boosting taxes to trim its debt, the International Monetary Fund said
    • India’s central bank bought 100 billion rupees ($1.4 billion) of benchmark 10-year bonds while selling 68.25 billion rupees of 2020 debt as it sought to cheapen longer-term borrowing
    • Prime Minister Narendra Modi’s political troubles deepened with his Bharatiya Janata Party losing control of the mineral-rich eastern state of Jharkhand just months after losing the state of Maharashtra
    • Modi’s government has set itself on a collision course with those protesting against a new religion-based citizenship law
  • Thailand will narrow its inflation target for next year as consumer-price growth remains subdued. The central bank’s new goal is to keep annual headline inflation within a 1%-3% range, compared with 1%-4% previously

    • Thai exports fell the most since April 2016 in November, dropping 7.4% year on year. The Fiscal Policy Office expects exports to expand 2.6% next year on an improving trade war outlook
    • The economic growth outlook of 2.8% next year is “disappointing” and policy makers are doing what they can to curb excessive gains in the currency, Governor Veerathai Santiprabhob said
    • The nation is set to spend 1 trillion baht ($33 billion) on infrastructure in 2020 through 2022
    • The Bureau of the Budget, the Finance Ministry, the National Economic and Social Development Council and the Bank of Thailand all approved the 2021 budget framework, including a deficit of 523 billion baht
    • Bank of Thailand is directly in charge of curbing baht strength, Finance Minister Uttama Savanayana said
  • Philippine Bureau of the Treasury will offer 420 billion pesos ($8.3 billion) of bills and bonds in the first quarter, nearly double the 220 billion pesos this quarter as it revives the weekly sales of short-term debt, according to a memo by Treasurer Rosalia de Leon
    • President Rodrigo Duterte signs law extending the availability of this year’s 3.66 trillion-peso budget until 2020, according to a copy of a document released by presidential palace
  • Taiwan plans to buy more U.S. agricultural goods along with other items in the next few years to reduce its trade surplus, Deputy Minister of Economic Affairs Wang Mei-hua said
  • Sri Lanka kept its benchmark interest rate unchanged for a third meeting as risks to economic growth waned and inflation stays subdued


  • Turkish President Recep Tayyip Erdogan sent his firmest signal yet that the country will deploy troops to support Libya’s internationally recognized government, saying recent commitments between the countries should be seen as a harbinger of steps to come
    • The central bank raised reserve requirement ratios for foreign-currency deposits and participation funds by 200 basis points in an effort to mop up foreign-currency liquidity from the market
  • South Africa published a long-anticipated draft of oil and gas legislation that will give the state a 20% carried interest in exploration and production rights, with the aim of increasing development of the industry
  • Serbia plans to tap international bond markets to pay for projects designed to double its economic growth rate under a new plan as the country exits years of austerity, according to Finance Minister Sinisa Mali
  • Uzbekistan’s ruling party won the first parliamentary elections held since President Shavkat Mirziyoyev came to power pledging to open up central Asia’s most populous nation after decades of authoritarian rule
  • Saudi Arabia and Kuwait agreed to resume oil production in a shared border region more than four years after halting output
  • Declining investment in oil production during several years of a global glut means fewer new projects boosting output are likely to start up in 2020, according to Bahrain’s energy minister
  • Iranian authorities have shut down mobile internet access across several provinces and security has been heightened in Tehran, the Iranian Labour News Agency reported, as mourning ceremonies approach for protesters killed last month in a government crackdown
  • Ivory Coast issued an arrest warrant for opposition presidential candidate Guillaume Soro on the threshold of an election year
  • Uganda expects economic growth to slow over the next two fiscal years while remaining about 6%, as the cash-strapped government makes budget cuts before long-awaited oil exports begin later in the decade

Latin America:

  • Brazilian President Jair Bolsonaro was discharged from hospital Tuesday after recovering from a fall at the presidential palace that affected his memory
    • Foreign investors piled into Brazil’s main stock exchange-traded fund the previous week amid signs economic growth is finally beginning to pick up
    • Brazil’s government will send a bill to Congress to strengthen protections for minority shareholders in the wake of a corruption scandal at Petrobras
    • Second-tier inflation index unexpectedly slowed, reinforcing market perception that the recent pressure on prices led by food costs was transitory
    • Unemployment rate dropped more than expected in the three months through November, adding to signs of an economic pickup, while bank lending rose 1.1% in November from previous month
    • A broad inflation index, IGP-M, accelerated less that expected to 2.09% from previous month
  • Fitch Ratings upgraded Argentina, reversing the Dec. 20 cut to restricted default imposed after the government delayed payments on $9.1 billion of Treasury bills
    • President Alberto Fernandez said an IMF mission will visit Buenos Aires in coming days without providing a specific date
    • Central bank cut its monetary policy rate to 55% from 58% on Thursday
  • Mexico’s central bank could take monetary-policy action as soon as February if it sees that inflation as well as internal and external risks remain low, said Governor Alejandro Diaz de Leon
    • Inflation slowed more in early December than economists forecast, solidifying the outlook for the central bank to further ease its relatively tight monetary policy next year
    • Economic activity fell 0.78% in October from a year earlier, while unemployment slid to 3.44% in November
    • Mexico will ask a United Nations court to settle a simmering diplomatic dispute with Bolivia, which it says is harassing allies of ousted President Evo Morales at its embassy in La Paz
  • Venezuela’s Information Minister Jorge Rodriguez said an alleged attack early Sunday on a military installation was planned by a group including opposition leader Juan Guaido and activist Leopoldo Lopez
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