EM Review: Vaccine Hopes, Biden Transition Boosted Risk Appetite

(Bloomberg) -- Emerging-market stocks and currencies posted their fourth week of gains last week amid optimism over vaccine developments and the formal start of President-elect Joe Biden’s transition to power. On a monthly basis, currencies are set for a sixth straight monthly gains in November, the longest streak since May 2017. Central banks in South Korea, Nigeria, Colombia and Sri Lanka all held rates steady as the scope for further monetary easing fades.

The following is a roundup of emerging-market news and highlights for the week through Nov. 29:

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Highlights:

• Leaders of the world’s richest countries promised to ensure equality in the race to vaccinate people against the coronavirus, even as President Donald Trump stayed quiet on sharing U.S.-made vaccines with other nations
  • A leading Chinese vaccine developer has applied for authorization to bring its Covid-19 shot to the market, seeking to get a jump on Western rivals as the race for a working inoculation against the virus enters the final stretch
  • AstraZeneca Plc’s Covid-19 vaccine looks like it’s headed for an additional global trial as the drugmaker tries to clear up uncertainty and confusion surrounding favorable results in its current study
• Biden said his transition team will not be “so far behind the curve” now that the Trump administration has begun cooperating on the fight against the coronavirus and providing access to intelligence reports after a three-week delay
  • Biden plans to nominate former Federal Reserve Chair Janet Yellen to serve as his Treasury secretary, people familiar with the matter said, choosing the first woman and a seasoned central banker for the nation’s top economic policy job as the coronavirus pandemic threatens another U.S. downturn

• China’s President Xi Jinping broke his silence on Biden’s election victory, sending the U.S. president-elect a message that he hopes to “manage differences” and focus on cooperation between the world’s two largest economies

  • The Trump administration is close to issuing a list of 89 Chinese aerospace and other companies that would be unable to access U.S. technology exports due to their military ties, Reuters reported
  • China’s imports of U.S. goods under the phase-one trade deal slowed last month after hitting a high in September, leaving the full-year target well out of reach
• A panel of OPEC+ ministers couldn’t reach an agreement on whether to delay January’s oil-output increase, leaving the matter unresolved before a full meeting of the cartel and its allies on Monday
• Bank of Korea Governor Lee Ju-yeol said the economy is expected to shrink less this year despite a resurgence of the coronavirus, while issuing a warning over rapid won gains that could undermine the recovery; the central bank board kept its key rate steady on Thursday and upgraded its growth forecasts
• Turkey took a further step toward mainstream economic management by abolishing a rule that compelled lenders to extend credit and buy government debt

Asia:

• Foreign investors are piling money into major Asian equity markets outside of China at the fastest pace in seven years this quarter
• The International Monetary Fund’s October acknowledgment of the case for temporary debt monetization in Asia marked yet another example of how the pandemic has upended economic orthodoxy

• China’s economic recovery stabilized in November, underpinned by solid global demand for exports ahead of the Christmas period and the stock market’s gain to its highest since 2015

  • China confirmed it’s compiling a global watch list of Taiwanese independence backers it plans to “punish”
  • Hong Kong Chief Executive Carrie Lam defended Beijing’s sweeping actions to exert greater political control over Hong Kong while outlining steps aimed at interlocking the two economies; she also said Hong Kong will expand the scope of the China stock connect program
  • China is very likely to exit from some of its stimulus measures as the economy improves, a leading state newspaper said on its front page Thursday; the central bank said it will maintain normal monetary policy for as long as possible
  • The foreign ministers of China and Japan agreed at a meeting in Tokyo to lift some virus-related travel restrictions by the end of the month
  • China will likely return to a more “proper” range of economic development next year, Premier Li Keqiang said
  • The U.K. is considering a ban on the installation of Huawei Technologies Co. 5G equipment as soon as next year to appease hawks pushing for tighter restrictions on the Chinese network equipment maker
  • China is set to impose anti-dumping duties of more than 100% on Australian wine from this weekend, adding to a series of sweeping trade reprisals this year and further escalating tensions with Canberra
• South Korea’s stocks hit a record high as improving trade data and the earnings outlook boosted investor confidence; early trade data showed exports extending their recovery in November
  • Household debt rose 2.7% to 1,682.1 trillion won in the third quarter, the fastest pace since 2016
  • The nation’s exporters see the won as too strong and cited currency volatility as one of their key concerns for next year, according to a trade group survey
• India stocks rose to a fresh record as foreign net buying was also set for a monthly record
  • India’s key manufacturing exports may lose market share to a China-backed Asian trade bloc
  • Indian banks are making fresh loans at the slowest pace in at least three years
  • Concern about the depth of India’s recession is slowly being replaced by optimism that a recovery is taking hold
  • India entered an unprecedented recession with the economy contracting 7.5% last quarter from a year ago due to the lingering effects of lockdowns
• Indonesia is planning to shorten the duration of the year-end holiday to avoid mass gatherings suspected of triggering a recent spike in cases
  • The country’s lenders are pushing back against central-bank pressure to further lower interest rates for their customers
  • Indonesia’s central bank will stay focused on supporting economic growth, even as inflation is expected to remain low due to weak demand, Governor Perry Warjiyo said
  • Indonesia’s tax collections from the production sectors are still “under deep pressure” amid the pandemic, Finance Minister Sri Mulyani Indrawati said
• Thailand’s trade indicators show a gradual recovery in many areas, according to the Commerce Ministry’s Trade Policy and Strategy Office; exports fell more than expected in October
  • Thousands of pro-democracy protesters in Thailand gathered outside the main office of the nation’s most valuable lender, in which King Maha Vajiralongkorn is the biggest shareholder, as they push for more transparency and accountability from the monarchy
  • Thailand’s manufacturing production fell 0.54% year-on-year in October, less than economists’ forecast
  • Thailand must check the gains in its currency as it makes it harder for exporters to compete in the global market, according to the nation’s largest industry group

• Economists have slashed their 2020 outlook for the Philippines by more than any other Southeast Asian nation as it struggles with one of the region’s worst coronavirus outbreaks

  • The Philippine government can further loosen movement curbs before year-end to support a recovery from recession
  • Budget deficit was 61.4 billion pesos ($1.3 billion) in October, according to the Bureau of the Treasury
  • The Philippines plans to offer total 120 billion pesos of treasury bills and bonds in December, Bureau of the Treasury says in memorandum to dealers

• Malaysia Prime Minister Muhyiddin Yassin survived a key test of his leadership on Thursday when he won enough support in parliament for his 2021 budget

  • October consumer prices fell 1.5% from a year earlier, the Department of Statistics
  • Palm oil exports fell by 18.66% m/m during Nov. 1-25, according to Intertek Testing Services
  • Exports rose 0.2% in October; median estimate was for a 0.4% decline
  • Malaysia has no current plans to extend a tax exemption on crude palm oil exports that’s set to end on Dec. 31, the Ministry of Plantation Industries and Commodities said
• A senior U.S. military officer who oversees intelligence gathering for the Indo-Pacific Command made an unannounced visit to Taiwan, Reuters reported
  • Taiwan’s economy grew 3.92% y/y in 3Q, compared with 3.3% estimate
  • Taiwan raised its forecast for growth this year as stronger-than-expected international demand for technology products shielded the economy from the global slowdown
  • An informal U.S.-led alliance to provide an alternative to China’s Belt and Road Initiative will provide greater transparency to countries seeking funding to develop their infrastructure, Taiwan’s finance minister said
• U.S. National Security Adviser Robert O’Brien told Vietnamese leaders they must curb illegal re-routing of Chinese exports and purchase more U.S. goods such as liquefied natural gas and military equipment in order to avoid punitive American tariffs
  • Vietnam reported its slowest inflation this year while exports rose in November even as the coronavirus pandemic continues to hinder trade activity
• Sri Lanka’s central bank kept borrowing costs unchanged for a third straight meeting, counting on fiscal measures to provide stimulus to an economy at risk from a new wave of Covid-19 infections
  • Sri Lanka’s long-term foreign currency debt rating was downgraded by Fitch to CCC from B-
• The government of Afghanistan and the rebel Taliban movement have agreed on procedural rules for peace talks to end the country’s 19 years of conflict

EMEA:

• Turkey’s central bank raised the amount of lira and FX deposits that commercial lenders must park at the monetary authority, according to a decree published in the Official Gazette
  • The country is lengthening its bond maturities on foreign and local markets as it seizes on investor optimism after President Recep Tayyip Erdogan’s economic revamp earlier this month
  • European Union foreign-policy chief Josep Borrell highlighted the possibility of tougher EU sanctions against Turkey over its activities in the eastern Mediterranean, saying the bloc’s leaders will tackle the matter at a Dec. 10-11 meeting
  • Turkey’s new economic managers are racing to reverse the interventionist policies spearheaded by President Recep Tayyip Erdogan’s son-in-law, but their market-friendly U-turn could initially mean more volatility for the lira
• The leaders of Poland and Hungary, who effectively vetoed the European Union’s $2 trillion spending package recently, are meeting as pressure builds on them to relent on their opposition to tying funding to upholding the rule of law
• Serbia is making a rare trip to the dollar bond market, raising 10-year debt to partly redeem its last outstanding notes in the currency due within a year
• Romania returned to international debt markets, with its fourth publicly syndicated transaction this year, as the country seeks to fund next year’s spending just before a crucial ratings decision and a general election

• South African inflation unexpectedly accelerated in October to the highest rate in seven months, driven by food, non-alcoholic beverages, housing and utilities

  • The nation’s business confidence jumped to the highest level in more than two years in the fourth quarter as further easing of lockdown restrictions spurred a resurgence in activity but economic risks could weigh on sentiment in the new year
  • The Public Investment Corp., Africa’s biggest fund manager, is willing to help South African power utility Eskom Holdings SOC Ltd. resolve its debt crisis, Finance Minister Tito Mboweni said at the Bloomberg Capital Markets Focus virtual event Tuesday
  • South Africa can’t implement a pay deal with public servants because it would precipitate a fiscal crisis, Finance Minister Tito Mboweni said
• Stronger African economies don’t need debt relief from bondholders, whose money will be crucial to help finance the recovery of the continent, according to Senegal Economy and Planning Minister Amadou Hott

• Nigeria’s central bank held its benchmark interest rate to allow previous cuts to flow through the economy, saying Africa’s largest economy should exit its recession by the end of this year

  • The nation’s official exchange rate should not be determined by the parallel market where the naira value has weakened to a three-month low
  • An attack by Boko Haram Islamist insurgents on rice farmers in Nigeria’s northeast left at least 110 of them dead, a United Nations official said
• Africa’s stocks and bonds are starting to win over investors scouring some of the developing world’s most beaten-down markets for returns
• A major battle for control of Ethiopia’s Tigray state capital appears imminent and fears are mounting that numerous civilians who are unable to escape the fighting could be caught in the crossfire
  • Efforts by African Union envoys to quell a civil conflict in Ethiopia have foundered, with Prime Minister Abiy Ahmed eschewing negotiations with the dissident Tigray state
• Zambian inflation quickened for the third straight month in November to a four-year high propelled by food and non-food items
• Dubai’s government raised $1.5 billion by reopening existing debt instruments, data compiled by Bloomberg show
  • The United Arab Emirates abolished the need for companies to have Emirati shareholders, local media reported, in a major shake-up of foreign ownership laws aimed at attracting investment into an economy reeling from the coronavirus and a decline in oil prices
• Oman, one of the weakest sovereigns in the Gulf Arab region, returned to the dollar debt market as a rally in its bonds that were issued about a month ago enabled it to lock in cheaper rates
• Saudi Arabia denied reports about a meeting between Crown Prince Mohammed Bin Salman and Israeli officials during a visit by the U.S. Secretary of State Michael Pompeo to the kingdom
  • The Saudi central bank has extended a loan deferral program to help small businesses cope with the fallout of the coronavirus pandemic until the end of the first quarter next year.
• Israel’s government instructed the military to prepare for a possible U.S. strike against Iran during the remainder of President Donald Trump’s term, Axios reported, citing unidentified Israeli officials
  • Iran accused Israel and the U.S. of being behind the assassination of one of its top nuclear scientists on Friday and vowed revenge
• Lebanon’s President Michel Aoun said a forensic audit at the nation’s central bank has become a requirement for talks with the International Monetary Fund, days after an audit firm hired to do so quit over lack of data
• Kenya’s central bank held its key interest rate for the fifth straight meeting as the impact of the coronavirus pandemic in East Africa’s largest economy started easing in the second half of the year

Latin America:

• Brazil surprised analysts with stronger-than-expected employment and budget numbers for October, a sign that the economic recovery seen in the past few months is gaining speed in the beginning of the fourth quarter
  • Annual inflation accelerated to 4.22% in mid-November, above the official target, amid higher prices for food and transportation
  • Economists raised their forecasts for both inflation and the key interest rate next year
  • Members of Brazil’s economic team see odds of reforms being approved next year growing thinner by the day, according to people familiar with the matter
  • Central bank president Roberto Campos Neto said policymakers are relatively comfortable with inflation
  • Brazil may sell external bonds before the end of the year, the Treasury said
  • Sao Paulo state is considering whether to reimpose more severe restrictions on the movement of people amid the Covid-19 pandemic
  • Brazil’s two biggest cities will be governed by centrist mayors who defeated President Jair Bolsonaro’s candidates in nationwide municipal elections, consolidating the return of more moderate political actors following a conservative wave that swept the country two years ago
• Mexico’s economy leaped 12.1% in the third quarter from the previous three months, the fastest pace in at least three decades amid a surge in manufacturing
  • Annual inflation slowed to 3.43% in mid-November, less than expected by all analysts in a Bloomberg survey, and below the ceiling of the target range
  • Nation recorded its highest trade surplus since at least 1984 in October, as exports to the U.S. boomed while internal demand stayed weak
  • Central bank expects economy to shrink 8.9% this year versus its prior forecasts of between 8.8% and 12.8%
  • Mexico’s central bank should be able to resume its cycle of interest rate reductions after the first quarter of 2021 once the slowdown of inflation is confirmed, Deputy Governor Jonathan Heath said

• Argentina’s Neuquen province reached a debt agreement with creditors, Governor Omar Gutierrez said

  • Economic activity increased 1.9% in September from August, in line with economists’ expectations
• Chile’s senate passed a government-backed bill allowing people to tap their pension savings for a second time, unleashing billions of dollars into the economy
  • Unemployment rate fell for the third straight month to 11.6% in the three months through October

• Peru sold $4 billion of bonds, including securities coming due in 100 years, just days after political turmoil gripped the country in the wake of former President Martin Vizcarra’s impeachment

  • The century bonds were sold at the lowest yield for an emerging-market government ever
• Colombia’s government estimates the economy will rebound 11.8% in 2021, after an estimated contraction of 6.8% this year, Finance Minister Alberto Carrasquilla said
  • The central bank left its key interest rate unchanged at 1.75% as the strong recovery from the coronavirus slump suggests the economy may not need extra stimulus
• Ecuador’s government is aiming to approve by mid-December an anti-corruption bill that is key to securing the disbursal of $2b by the IMF
• Suriname extended the expiration date of its consent solicitation, which seeks to delay payments on the nation’s 2023 and 2026 dollar bonds, until Dec. 4 at 5 p.m. ET

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