EM Review: Blue Wave Spurred Stock Rally as U.S. Yields Jumped

Emerging-market stocks posted their biggest weekly gain since early November after Democrats won control of the U.S. Senate in Georgia runoff elections, spurring optimism over more fiscal stimulus. Risk assets rallied despite chaos in the U.S. Capitol. U.S. Treasury yields climbed above 1% for the first time since the pandemic-driven turmoil in March, boosting the dollar and weighing on developing-nation currencies.

The following is a roundup of emerging-market news and highlights for the week through Jan. 10:

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


  • Democrats won control of the U.S. Senate for the first time in six years with victories in two runoff races in Georgia -- a state that hadn’t sent a new Democratic senator to Washington for two decades
    • Joe Biden called for trillions of dollars in immediate further fiscal support, including increased direct payments
  • Biden was formally recognized by Congress as the next U.S. president, ending two months of failed challenges by his predecessor, Donald Trump, that exploded into violence at the Capitol as lawmakers met to ratify the election result

    • The House will take up a resolution to impeach President Donald Trump for the second time in less than two years over his actions encouraging a mob that stormed the Capitol, Speaker Nancy Pelosi said
  • The New York Stock Exchange is proceeding with a plan to delist three major Chinese telecommunications firm after U.S. Treasury Secretary Steven Mnuchin disagreed with its earlier decision to give the companies a reprieve

    • MSCI Inc. and S&P Dow Jones Indices will remove the companies from benchmark indexes
    • Trump signed an order banning U.S. transactions with eight digital Chinese payment platforms though it will be up to Biden to decide whether to enforce the policy
    • FTSE Russell pulled another three Chinese firms from its indexes to comply with a U.S. order sanctioning companies with military ties following the removal of eight stocks last month
  • Saudi Arabia surprised the market with a large cut in crude production, an assertion of primacy over the global oil industry. The additional million-barrel-a-day oil production cut will last two months
  • Federal Reserve officials shouldn’t intervene to slow rising bond yields because that is expected to happen as the U.S. economy recovers, Fed Bank of Dallas President Robert Kaplan said
  • China’s stock benchmark topped its 2015 bubble high, marking a recovery from one of the country’s worst equity crashes
  • Mexico sold $3 billion in 50-year dollar-denominated bonds at around 3.75%, down from the initial price talk of about 4.15%; demand reached $10 billion. Indonesia also raised $3 billion from selling dollar bonds overseas
    • Emerging-market governments and companies raised a record $27.5 billion through dollar-denominated bond sales in the first eight days of the year
  • Factory activity across Asia gained further momentum, spurred by demand for the region’s exports, while China’s recovery is starting to moderate
  • The World Health Organization expressed disappointment with China for delaying the travel of experts to the Asian country to investigate the origin of the virus, in a rare instance of public criticism from the international organization
  • The experimental vaccine developed by China’s Sinovac Biotech Ltd. was shown to be 78% effective against Covid-19 in late-stage Brazil trials
  • Emerging-market governments and companies raised a record $27.5 billion through dollar-denominated bond sales in the first eight days of the year
  • The U.S. will remove decades-old, self-imposed restrictions on how its diplomats and other officials interact with Taiwan, a move that may inflame tensions with Beijing
Asset moves last weekWeekly
MSCI EM stocks index+4.8%
MSCI EM FX index+0.1%
Bloomberg Barclays global EM local currency bond index+0.1%


  • China’s bond defaults rose to a record $30 billion in 2020, including high-profile enterprises that had previously counted on the implicit guarantees of the state
    • China condemned the former chairman of China Huarong Asset Management Co. to death on charges of malfeasance, one of the most severe sentences to stem from President Xi Jinping’s anti-corruption drive
    • China sentenced Hu Huaibang, a former chairman of the nation’s biggest policy bank, to life imprisonment on charges of corruption
    • There are growing signs that Beijing is keen to slow the ascent in China’s currency after it surged to the highest level since mid-2018 against the dollar
    • Hong Kong arrested dozens of opposition figures under a national security law, an unprecedented crackdown that included an American lawyer
  • A bout of foreign selling wiped out gains in South Korea’s benchmark stock index after it topped the 3,000 mark for the first time
    • Korea’s population declined in 2020 for the first time on record as births dropped amid the pandemic
    • North Korean leader Kim Jong Un told a congress of his ruling party he wants to raise defense capabilities to a “higher level” as the nation seeks a new path away from shortcomings that have shaken its economy
  • India’s economy is set for its biggest annual contraction in records going back to 1952. Gross domestic product will shrink 7.7% in the financial year ending March 2021

    • Tens of millions of doses prepared for India are sitting in storage despite having been authorized for use
  • Indonesia sold a record amount of local-currency government bonds

    • The crash of Sriwijaya Air Flight 182 on Saturday is another blight on Indonesia’s already poor aviation safety record
    • Indonesia will impose stricter movement limits for Java and Bali as the coronavirus outbreak leads to hospitals across the country to fill up
    • Indonesia’s government is set to start its vaccination program on Jan. 13, with President Joko Widodo taking the first jab
  • Thailand hopes to avoid a full national lockdown to stem a wave of infections that began in mid-December and has spread to more than 50 of 77 provinces
    • The country will get its first lot of Covid-19 vaccines from China’s Sinovac Biotech Ltd. next month
    • Bank of Thailand said a resurgence in coronavirus infections is raising the odds the economy will expand less than forecast, as authorities curb business and travel to quell the outbreak
  • Tensions are rising in the largest party in Malaysia’s ruling coalition over whether a general election should be held amid the nation’s worsening coronavirus epidemic
  • Philippine interest rates will likely remain on hold at least through the first half of 2021 as the economy recovers, central bank Governor Benjamin Diokno said

    • Diokno said there’s still “some play” left for the monetary authority to reduce banks’ reserve requirement ratio
    • The central bank approved the government’s request for a 540 billion-peso ($11.2-billion) loan
    • The government is ready to pay $2.8 billion of foreign debt due in January and the nation can afford not to rush to sell debt overseas, Treasurer Rosalia de Leon said
  • As the world’s pile of negative-yielding debt rose to a record $18 trillion in December, authorities in Taiwan were working hard to keep the government’s bond yield above zero
    • Taiwan’s central bank urged the public to help maintain the stability of the FX market
    • Exports continued their double-digit recovery in the final month of 2020 as ongoing demand for technology products and components drove shipments to a new all-time high


  • Suspected Russian hackers broke into the Department of Justice’s email system and may have also compromised the U.S. federal judiciary’s electronic filing and case management system, authorities said
    • U.S. intelligence agencies and the FBI said a major hack of the federal government and some corporations was likely undertaken by Russia and “will require a sustained and dedicated effort to remediate”
  • Turkey’s year-end inflation rate exceeded even the central bank’s bumped-up forecast, leaving Governor Naci Agbal with little choice but to keep access to credit tight
    • Turkey’s trade deficit widened 69% to $49.9 billion in 2020, according to data from the Trade Ministry
  • Polish inflation slowed to its lowest level since April 2019, leaving room for the central bank to continue weakening the zloty or further cut interest rates
    • The zloty swung back to a level seen as a possible trigger-point for central bank intervention, keeping investors on edge about its true intentions for preventing more gains
  • South African government officials have called for stricter measures to curb soaring coronavirus infections at a meeting to discuss the state’s response to the pandemic, according to people familiar
    • The country reported a record number of new Covid-19 infections, of over 20,000 in 24 hours
    • A manufacturing sentiment index fell to a five-month low in December as the country increased restrictions
  • Hospitals in Zimbabwe are reeling from a renewed surge in the coronavirus, with a shortage of beds and equipment threatening to overwhelm the public health system
  • Benin is preparing to sell Africa’s first euro-denominated bonds in 2021 to lock in cheaper borrowing costs
  • Saudi Arabia, Bahrain, the United Arab Emirates and Egypt agreed to fully restore ties with Qatar, ending a more than three-year dispute that divided the major energy-producing region at a time of heightened tensions over Iran
  • Dubai’s biggest bank, Emirates NBD PJSC, sold the first dollar-denominated bonds from the Middle East this year
  • Business activity in the Arab world’s two largest economies improved at the end of last year, with Saudi Arabia seeing its strongest expansion in 13 months
    • Business conditions for Egypt’s non-oil private sector worsened toward the end of 2020 as the pandemic hit demand and triggered an acceleration in job cuts
  • Dubai announced the fifth installment of its coronavirus relief package, worth 315 million dirhams ($86 million), bringing the total size of Covid-19 stimulus to 7.1 billion dirhams
  • Annual inflation in urban parts of Egypt grew at a slower pace in December, potentially clearing the way for the central bank’s focus to be on the global impact of the pandemic when it mulls upcoming rate decisions

Latin America:

  • Brazil’s President Jair Bolsonaro continued to mistrust Covid-19 vaccines, saying residents don’t even want to get the shot, citing information he obtained by polls
    • Local funds have increased their long positions on the real versus the dollar to the highest in a year and stocks reached an all-time high amid increased appetite for riskier assets
    • Brazil’s health regulator received the request for temporary authorization for emergency use of the Coronavac vaccine; the nation’s virus death toll passed 200,000
    • Traders monitored news about the race for the lower house presidency; representative Baleia Rossi announced his candidacy and defended the extension of emergency aid payments to informal workers
    • Brazil posted a $42 million trade deficit in December, compared with an estimated $339 million surplus
    • Industrial production rose for a seventh month in November on a surge in capital goods
  • Mexico may scrap its antitrust and energy regulators in a far-reaching overhaul of the nation’s bureaucracy, President Andres Manuel Lopez Obrador said

    • Mexican migrants sent home a record $40.6 billion in cash last year, up 11% from the previous year
    • Nation reported the highest daily increase in Covid-19 deaths since adjusting its counting strategy three months ago
    • Inflation slowed to 3.15% in December, just above target, amid falling energy costs
    • The first two of President Andres Manuel Lopez Obrador’s nominations to the central bank board, cast dissenting votes to cut interest rates, minutes from the Dec. 17 meeting showed
  • Argentina’s Entre Rios province was sued in the U.S. for $11.9 million by a group of creditors who claim they’re owed money from a missed interest payment

    • The country will issue $7.5 billion dollars in non-transferable 10-year Treasury bills to the central bank
  • Colombia’s government is said to be reviewing plans to sell a stake in Interconexion Electrica SA that is attracting interest from publicly owned companies
  • Chile’s consumer prices rose rose 0.3% in December, more than the 0.2% median estimate, on a jump in the cost of clothing and household goods
  • Bolivia joined Argentina and Venezuela in approving the use of Russia’s Sputnik V vaccine and also recommended China’s Sinovac shot
  • Uruguay is planning to sell about $500 million in dollar bonds by the end of next month
Upcoming data and economic release:
  • For Asia, click here
  • For Eastern Europe, click here
  • For Latin America, click here

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