EM Review: Worst Month Since August as Coronavirus Spreads

EM Review: Worst Month Since August as Coronavirus Spreads

(Bloomberg) -- January was the worst month since August for emerging-market stocks and currencies and China’s offshore yuan weakened past 7 per dollar as investors fretted about the impact of the coronavirus on the global economy. The number of people infected by the illness soared as the World Health Organization called the spread a global health emergency. The U.S. and Japan advised their citizens to avoid travel to China. The Philippines reported the first death outside China.

The following is a roundup of news and highlights in developing economies for the week ending Feb. 3.

Read here our emerging-market weekly preview, and listen here to our weekly podcast.


  • China reduced rates as it injected cash into the financial system Monday, with the central bank seeking to ensure ample liquidity as markets plunge. It cut borrowing costs on the funds by 10 basis points
  • The World Health Organization called the outbreak of coronavirus in China a global health emergency, citing the risk that the sometimes-deadly virus could expand to other countries beyond the smattering of cases outside China so far
  • The first official indicator of the Chinese economy in 2020 signaled the nation’s factories were struggling even before the country shut down for the Lunar New Year holiday and the coronavirus outbreak worsened
    • Direct impact of the coronavirus outbreak is mostly on demand as people stay home, while on supply side there have been transport stoppages and workers idled, International Monetary Fund spokesman Gerry Rice said
  • Federal Reserve Chairman Jerome Powell signaled the central bank would pull out all the stops to combat a global disinflationary trend, foreshadowing a potential shift toward easier monetary policy
  • Republican Lisa Murkowski said she’ll vote against calling witnesses in President Donald Trump’s impeachment trail, dashing Democratic hopes of introducing new evidence
  • Hungary left its monetary policy unchanged as the central bank looked past the weakest forint on record in anticipation that surging inflation will slow
  • The U.S. and Kenya are expected to announce negotiations on a free-trade agreement, America’s first such deal with a sub-Saharan country
  • Kenya’s central bank joined its South African counterpart by unexpectedly cutting interest rates, citing well-anchored inflation expectations and an economy that’s operating below its potential. The monetary policy committee reduced its key rate to 8.25% from 8.5%
  • Inflows to exchange-traded funds focused on emerging markets slumped to the lowest in seven weeks as a deadly virus from China spread throughout the world
Asset Moves Last Week and Last Month:WeeklyJanuary
MSCI EM stocks index-5.1%-4.7%
MSCI EM FX index-0.9%-1.1%
Bloomberg Barclays Global EM Local Currency bond index-0.4%+0.2%


  • China’s onshore markets were shut for the extended Lunar New Year holidays
  • The spread of the novel coronavirus may negatively affect South Korea’s economy, and sufficient and swift budget support is needed to prevent that, Finance Minister Hong Nam-ki said
    • South Korea will take steps to stabilize markets in case the fear of the coronavirus expands, Vice Finance Minister Kim Yong-beom said
    • Confidence among consumers jumped to the highest level since June 2018 in January
    • The nation’s industrial output rose in December the most in three years and semiconductor stockpiles dropped
    • The U.S. military has begun issuing furlough warnings to almost 9,000 civilian South Korean employees, as Washington and Seoul remain at loggerheads over President Trump’s demand its ally pay more money for its hosting of American troops
  • Indian Prime Minister Narendra Modi’s second budget in seven months disappointed investors who were hoping for big-bang stimulus to revive growth in Asia’s third-largest economy
    • U.S. Trade Representative Robert Lighthizer will be in India in the second week of February to finalize a trade deal ahead of Trump’s expected visit, according to people with knowledge of the matter
    • India has set up coronavirus screening across 21 airports and in border states
    • The Reserve Bank of India nominates Janak Raj as monetary policy panel member
    • Modi’s government surprised investors by saying it will sell part of its stake in the state-run behemoth Life Insurance Corp. of India to meet its record asset-sale target
    • The country has increased the limit for overseas investment in the nation’s corporate bonds to 15% of its outstanding stock, compared with 9% now, Finance Minister Nirmala Sitharaman said
  • Foreign direct investment into Indonesia rose 7.7% to 423.1 trillion rupiah ($31 billion) last year from 392.7 trillion rupiah a year earlier
    • Bank Indonesia projects economic growth of 5.5%-6.1% in 2024
    • Central banks cannot be the only game in town amid unprecedented uncertainty and global slowdown, according to Bank Indonesia Governor Perry Warjiyo
    • The central bank continued to intervene in the markets to stabilize rupiah
  • Thailand’s government said it will consider new steps to support the economy, which is on course for disappointing performance because of the coronavirus outbreak, a stalled budget and a sapping drought

    • The Tourism Authority of Thailand expects the number of Chinese visitors to fall by “at least 2 million” amid the outbreak of virus, TAT Governor Yuthasak Supasorn said
    • Thailand “can 100% control” the spread of the novel coronavirus that originated in China, but won’t be complacent, Prime Minister Prayuth Chan-Ocha said
    • The Finance Ministry cut its 2020 economic growth forecast to 2.8% from its October projection of 3.3% and sees the baht averaging 30.50 per dollar this year
    • The Bank of Thailand cut the auction size for some bills and bonds. The maximum issue size per auction for three- and six-month bills and two-year bonds is reduced, the central bank said
    • The nation’s court accepted case seeking ruling on budget vote’s validity
    • Country posted a bigger-than-expected current account surplus in December
  • The Philippine central bank will go slow on monetary easing this year on signs that economic growth will stay robust and inflation will remain stable, Governor Benjamin Diokno said
  • The virus outbreak could hurt Malaysia’s economy and the nation will monitor food trade movement to safeguard the safety of Malaysians, Economic Affairs Minister Azmin Ali said
  • The outbreak of the coronavirus is unlikely to affect Taiwan’s investments or exports as Taiwanese companies with operations in China may accelerate repatriation of investments back to Taiwan, National Development Council Deputy Minister Cheng Cheng-mount said
    • President Tsai Ing-wen said she has instructed her administration to prepare measures to stabilize equity and foreign-exchange markets to weather the impact of the coronavirus on the economy
    • Economic growth outlook and repatriation of funds by Taiwanese companies indicate ample momentum, Taiwan’s Minister of Finance Su Jain-rong said
    • At least 5 board members of Taiwan’s central bank said they see no need to cut rates, according to the minutes of the Dec. 19 meeting released Thursday


  • Lebanon’s Eurobonds rallied late last week as hopes rose that the crisis-ridden nation will repay $1.2 billion of notes maturing on March 9
  • Polish economic growth slowed to its worst in three years in 2019, a result that suggests the expansion decelerated to below 3% on an annual basis in the last quarter
    • The European Union’s top official for judicial affairs pressed Poland to help find a solution to their clash over the rule of law, which legal experts warn can isolate the ex-communist country from the rest of the bloc
  • Turkey’s central bank made no changes to its inflation outlook for the end of this year and next, reinforcing a message of confidence that it’s keeping a lid on prices despite a pickup in cost pressures and rapid-fire cuts to interest rates under the new governor
    • President Recep Tayyip Erdogan voiced rare recent criticism of Russia for its conduct in Syria, saying his “patience is running out” over the ongoing bombing of opposition Islamist forces in Idlib province
    • Turkey’s sovereign assessment and outlook were affirmed by S&P Global Ratings. The ratings company kept its credit rating for Turkey at B+, four notches below investment grade, with a stable outlook
    • Turkey will take additional measures against “terror attacks” on civilians and its troops in Syria, especially in Idlib, despite agreements with “active nations,” according to National Security Council meeting declaration released late Thursday
  • Moody’s Investors Service said it is looking for signs of a credible medium-term vision for South Africa and said it’s “a bit early” to judge the government’s policy and structural reforms after changing its outlook on the country’s credit ratings to negative almost three months ago
    • South Africa has no fiscal space left and must implement strong budget consolidation and state-owned company reforms to ensure its debt sustainability, the IMF said
    • South Africa had a trade surplus of 14.8b rand in December
  • Moody’s said Zambia had yet to address risks related to the rollover of its dollar bonds
  • Saudi Arabia is “closely monitoring” the effect of the Chinese coronavirus outbreak on the oil market, but so far believes the crisis will have a “very limited impact” on global demand
  • The United Arab Emirates reported the first cases of the novel coronavirus in the Middle East on Wednesday
  • The Bank of Angola left its key rate unchanged at 15.5%
  • Economic growth in Rwanda could accelerate to more than 10% this year if construction of a planned $1.3 billion airport starts, according to the World Bank, which increased its estimate for 2019 expansion for a second time
  • Zimbabwe’s government has approached the U.A.E. in hopes of selling a stake in its national oil company, according to three company and government officials familiar with the plan. It also wants companies in the U.A.E. to buy more of its gold, they said
  • Ghana left interest rates unchanged at 16% in line with the median forecast of economists surveyed by Bloomberg

Latin America:

  • Argentina’s government has laid out a timeline for its debt negotiations with private creditors, but analysts are skeptical about its ability to meet the March 31 deadline to wrap up talks with bondholders
    • The IMF expects to send staff to Buenos Aires in February for a technical mission as Argentina’s record $56 billion credit line remains on hold
    • Province of Buenos Aires extended a deadline for creditors to accept a proposal to delay a key bond payment until Feb. 3, days ahead of a cut-off to avoid default
    • Central bank lowered the floor of its benchmark interest rate for the fifth time under President Alberto Fernandez in an effort to stimulate growth and make credit more accessible
    • Central bank is forecasting a “significant” slowdown in inflation after consumer prices rose 54% last year
  • Brazil’s real weakened to a record on Friday, past the level at which the central bank last sold dollars to prop up the currency
    • Lower House speaker Rodrigo Maia said the tax reform bill is expected to be voted on in April
    • Rapporteur of tax reform in the Lower House said Congress aims to pass the bill in both the House and the Senate in the first half of the year
    • Economy minister Paulo Guedes said the government will send a public sector reform proposal to Congress and will do everything to get the tax reform approved this year
    • Brazil economists lowered their forecasts for both the key rate and inflation this year after activity data disappointed
    • Country received $3.7 billion in foreign direct investment Jan. 1-23, the central bank’s statistics department head said
  • Chile kept its benchmark rate unchanged as the worst social unrest in decades clouds the outlook for economic growth and saps demand for the peso
    • Congress approved a tax bill presented by the administration of President Sebastian Pinera to fund its social agenda and ease months of social unrest
    • Chile’s jobless rate rose less than expected and industrial production grew 3.2% year-on-year in December, surprising economists
  • Mexico’s economy was flat in the fourth quarter as industrial output shrank, capping an economic contraction in 2019, the first year of President Andres Manuel Lopez Obrador’s term
    • Trump signed into law a new trade pact with Canada and Mexico on Wednesday, sealing a political victory that will help neutralize Democratic attacks on his economic record
    • Retail sales rose 2.1% in November from a year ago, exceeding a 0.4% forecast
  • Peru’s “disappointing” 2019 economic growth figure didn’t accurately reflect strong numbers posted in several key areas, central bank President Julio Velarde said
    • A split new Congress in Peru and a dramatic collapse in support for the opposition Fujimori family may smooth the path of President Martin Vizcarra as he tries to pass economic and judicial reforms in his final 18 months in power
  • Bolivia has depleted its “war chest” of international reserves to the point that it no longer has enough dollars to defend the nation’s fixed exchange rate, according to Fitch Ratings
  • Colombia left its benchmark interest rate unchanged as faster growth and core inflation deter policy makers from joining other emerging markets in increasing stimulus
    • Unemployment rate was at 10.5% in December, below economists 11% forecast
Upcoming Data and Economic Releases
  • For Asia, click here
  • For Eastern Europe, click here
  • For Latin America, click here

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.