EM Review: Risk Assets Extended Rally on Stimulus Progress, Fed

Emerging-market stocks and currencies gained for a seventh week last week, the longest winning streak since January, amid progress on a U.S. stimulus bill and as the Federal Reserve pledged to remain accommodative. Central banks in Mexico, Indonesia, Russia and Colombia all kept interest rates unchanged.

The following is a roundup of emerging-market news and highlights for the week through Dec. 20:


  • U.S. congressional leaders reached a deal on roughly $900 billion spending package to bolster the economy amid the spread of the coronavirus, giving lawmakers a short timetable to review and pass what would be one of the biggest economic-rescue measures in the nation’s history
    • The House passed a one-day stopgap funding measure that would prevent a government shutdown at midnight
  • President-elect Joe Biden sought to dispel any questions about the legitimacy of his victory and called on the American people to accept the outcome hours after the Electoral College sealed his win
    • Senate Majority Leader Mitch McConnell recognized Biden as the winner of the election the day after the Electoral College confirmation
  • Moderna Inc.’s Covid-19 vaccine was cleared by U.S. regulators, the second vaccine to gain emergency authorization this month as a mass immunization effort ramps up across the country

    • More than 16 million Britons are now required to stay at home as a lockdown came into force in London and southeast England, part of Boris Johnson’s attempt to control a new strain of the coronavirus
    • South African genomics scientists have found that a new variant of the coronavirus is driving a surge in infections in the country
    • New York was headed toward a second full shutdown if Covid-19 cases and hospitalizations continue at their current pace, Governor Andrew Cuomo said. New cases in California broke another record
    • The first known allergic reaction to the Pfizer Inc. Covid-19 vaccine in the U.S. was reported in Alaska as some snarls began to emerge in the effort to send the shots across the country
  • Federal Reserve Chairman Jerome Powell sounded the most optimistic that he’s been since the coronavirus crisis began in March, while pledging that the central bank will keep providing the economy with plenty of support well into the future
  • The U.S. Treasury Department designated Switzerland and Vietnam as currency manipulators for the first time, while keeping China on a watch list, in the Trump administration’s final foreign-exchange policy report
  • The U.S. Commerce Department announced it’s blacklisting Semiconductor Manufacturing International Corp., drone maker SZ DJI Technology Co. and more than 60 other Chinese companies “to protect U.S. national security.” China threatened to impose countermeasures
    • Chinese Foreign Minister Wang Yi called for Beijing and Washington to return to dialogue, while blasting President Donald Trump’s “America first” policies
    • Trump signed legislation that could kick Chinese companies off of U.S. exchanges unless American regulators can review their financial audits
    • MSCI Inc. became the third index provider to delete some Chinese stocks from its benchmarks, after the Trump administration banned U.S. investments in companies with links to the Chinese military
  • Prime Minister Scott Morrison said a Chinese ban on Australian coal imports would breach World Trade Organization rules, as his government urged Beijing to resume dialog to ease the worsening diplomatic dispute
    • Australia will challenge China at the World Trade Organization over Beijing’s decision to impose hefty tariffs on its barley exports
  • China said talks with the European Union on a bilateral investment deal are in the final stages, citing progress between negotiators as they push for an agreement before a year-end deadline
  • The suspected Russian hacking spree that has roiled U.S. government agencies poses a “grave risk” to federal, state and local governments as well as critical infrastructure and the private sector, according to an advisory
    • President Trump downplayed the severity of a massive cyber-attack on the U.S. government and suggested China may have been responsible
  • The U.S. imposed sanctions on Turkey’s defense industry over the purchase of Russian missiles, a move that’s set to put more strain on a key NATO ally’s military
  • Talks between the U.K. and European Union will resume on Monday after both sides missed another deadline to reach a post-Brexit trade deal with few signs that either is ready to compromise
  • OPEC cut forecasts for oil demand as the group and its allies prepare to weigh up whether they can continue gradually restoring halted supplies
  • The World Bank corrected two recent reports ranking nations by ease of doing business, adjusting the scores for China and three other countries based on an internal audit following staffers’ allegations of “undue pressure” by management to alter ratings
  • The economic blow from the coronavirus has wiped out 81 million jobs across Asia-Pacific this year, according to the International Labour Organization
Asset moves last weekWeekly
MSCI EM stocks index+0.9%
MSCI EM FX index+0.1%
Bloomberg Barclays global EM local currency bond index+0.3%


  • China injected cash into the financial system by offering medium-term loans in its latest effort to ensure banks have sufficient liquidity
    • China said it has already administered more than 1 million coronavirus vaccines since July and plans to distribute more
    • China said it will implement “reasonable” monetary policy next year and ensure fiscal plans are sustainable, signaling it will limit its stimulus measures as the economy recovers
    • China pulled further ahead of other major economies in November as industrial output and retail sales strengthened
    • A troubled Chinese clothing firm has defaulted on two domestic bonds in 24 hours, in the latest sign of financial stress among the country’s weaker private companies
    • Brazil is close to an agreement that would allow the world’s second-largest corn exporter to boost sales of the grain to China, a move that could threaten the U.S.’s dominance, according to people familiar
  • South Korea’s economy is expected to expand 3.2% after contracting 1.1% this year, according to the finance ministry’s 2021 policy outlook
    • South Korea lost the largest number of manufacturing jobs in almost two years in November, suggesting the pandemic’s toll is broadening
    • A Bank of Korea board member said expanding asset purchases may be needed to ease the volatility of long-term market yields
    • South Korean President Moon Jae-in is faced with a decision on the fate of his justice minister after she offered to resign over a dispute with the country’s top prosecutor that helped send the government’s approval rating to a record low
    • The Bank of Korea and the U.S. Federal Reserve will extend their $60 billion currency swap contract by six months
  • India’s retail inflation slowed for the first time in three months in November, although the drop may not be enough to prompt the central bank to resume rate cuts
    • India’s central bank governor cautioned against a possible change to the inflation target mechanism, saying it would dilute its effectiveness toward setting monetary policy
    • India expects to raise as much as $53 billion by selling airwaves at an auction in March next year
    • Even when viewed in isolation, the $14 billion outflow from India’s bond market in 2020 is remarkable: Foreign investors have never sold so much in a single year
  • Indonesia will offer free Covid-19 vaccines to people after considering the state budget, President Joko Widodo said
    • Indonesia plans to vaccinate its young working-age population against the coronavirus before the elderly, in contrast to much of the world
    • Indonesia’s 10-year government bond yield fell to the lowest in more than seven years
    • The rupiah’s exchange rate level is 10% below its fundamentals, according to Bank Indonesia Governor Perry Warjiyo
  • Thailand is easing travel restrictions on visitors from 56 countries, including the U.S., Japan and Singapore, ahead of the peak holiday season to boost the ailing tourism sector

    • Thailand suspended its domestic travel subsidy program ahead of the peak holiday season to investigate allegations of irregularities in the government-funded program
  • Malaysia Prime Minister Muhyiddin Yassin survived his latest leadership test after lawmakers approved his 2021 budget during the final vote in the lower house of parliament
  • The Philippine government may seek another 540 billion pesos ($11 billion) in loans from the central bank, Treasurer Rosalia de Leon said

    • Bangko Sentral ng Pilipinas raised its forecasts for average inflation this year and next, while keeping its outlook for 2022, Deputy Governor Francis Dakila said
    • The World Bank approved two project loans worth $900 million to support the Philippines’ efforts to recover from the pandemic
  • Taiwan’s central bank left its benchmark rate unchanged, with the focus shifting to the local dollar after the U.S. put the island economy back onto its watchlist of potential currency manipulators


  • Turkey’s central bank chief promised to go all in to curb inflation and build up national reserves, a continuation of the orthodox policy guidance he has built since taking over last month
    • Turkey’s parliament has approved the central government’s 2021 budget that targets a deficit of 245 billion liras ($32 billion), state news-agency Anadolu reported
    • Turkey plans to start Covid-19 vaccinations using the Chinese-made Sinovac Biotech Ltd. shots as early as next month, before it completes human trials, officials said
  • The Polish central bank ended the year with its biggest bond-buying auction since July, but it wasn’t enough to change the picture in the quietest quarter for quantitative easing since the program started
    • Poland’s central bank moved to weaken the zloty for the first time in a decade, delivering on a warning that it won’t tolerate a stronger currency as the economy tries to recover from the Covid-19 pandemic
    • Poland will close hotels, ski-slopes and shopping malls under the planned quarantine at the turn of the year as it braces for “tough days and weeks,” Health Minister Adam Niedzielskis said
    • Poland and Hungary were hit with fresh rebukes over their failure to comply with European Union law, highlighting the risk of billions in euros of losses when a new mechanism tying disbursements from the bloc’s budget to democratic standards kicks in next year
    • Poland plans tax exemptions for foreign central banks that buy its government debt in a bid to lure more “stable” bondholders to finance a bulging pandemic-era budget deficit
  • Hungary left its monetary policy unchanged despite a slowdown in inflation and a rally in the forint
  • Czech central bankers signaled that arguments for rate increases next year may be getting stronger as expanded government stimulus spending mitigates the economic hit from the coronavirus. The central bank held its benchmark interest rate at 0.25%
    • The Czech Republic approved its 2021 budget with a deficit that may exceed this year’s virus-swollen shortfall under a plan by Prime Minister Andrej Babis to boost the economic recovery
  • President Vladimir Putin dismissed new information linking Russian secret services to the near-fatal poisoning of opposition leader Alexey Navalny, saying if Russia had wanted to kill the politician it would have succeeded
    • Russia detailed plans to tax wheat exports next year in response to Putin’s call to cool food-price inflation
    • European officials have provided information to the U.S. government indicating that Russian billionaire Oleg Deripaska continued to exert control this year over United Co. Rusal International PJSC, which the officials say was a breach of a U.S. sanctions agreement reached in 2018
  • The European Union expanded sanctions against Belarus as a result of President Alexander Lukashenko’s crackdown on protesters following disputed election in August
  • Saudi Arabia said its spending plans for next year would be expansionary, as it leans more heavily on government-controlled funds to make up for cuts to a finance ministry budget

    • Saudi Arabia has stopped disclosing projected revenue from oil following the listing of Aramco, as doing so could give clues about the state energy giant’s dividend plans
    • The kingdom’s oil economy contracted 8.2% in the third quarter compared with a year ago, the most since the current readings began a decade ago
  • The U.S. is seeking to build on the diplomatic recognition of Israel by the United Arab Emirates and Bahrain, holding joint talks on energy cooperation between the three Middle Eastern Countries
  • Abu Dhabi is planning to re-open for international tourists by early January as it eases restrictive measures
  • Business activity in Dubai dropped for a second month in November
  • Egypt has approached investment banks to advise on a plan to raise as much as $7 billion from international debt markets in the first half of next year, according to people familiar
  • Iran’s Supreme Leader Ali Khamenei threw his support behind efforts to forge a diplomatic breakthrough with the incoming Biden administration and restore the 2015 nuclear deal
    • Iran said it planned to roughly double oil production in the next year as the country anticipates a loosening of U.S. sanctions after Biden becomes president
  • The South African economy’s ability to recover from its longest downward cycle since 1945 has been dealt a blow by new restrictions to curb surging coronavirus infections

    • South Africa’s consumer confidence remained subdued even after more people were allowed to get back to work.​​
    • Johnson & Johnson became the first company to apply for registration of a Covid-19 vaccine in South Africa, the head of the country’s health products regulator said
  • Nigerian inflation quickened to an almost three-year high in November as dollar shortages, insecurity in farming areas and supply bottlenecks stoked food prices
    • Nigerian President Muhammadu Buhari ordered the reopening of the nation’s land borders, ending a 16-month shutdown that raised food prices and curbed regional trade
  • Zimbabwe’s central bank held its key interest rate at 35%

Latin America:

  • Mexican lawmakers have postponed until February debate over a controversial bill that would have forced the central bank to buy possibly-illicit dollars

    • The bill would require Banxico to act as the buyer of last resort for local banks that are having trouble selling their dollars back to the U.S. due to money laundering controls
    • President Andres Manuel Lopez Obrador said it was an “exaggeration” to suggest the central bank’s autonomy could be affected by the bill
    • Mexico City will shut down all nonessential activity starting through Jan. 10 as Covid-19 cases soar
  • Brazil reached 7 million coronavirus cases as infections picked up pace
    • All Brazilians are required to be vaccinated against Covid-19 under the penalty of being banned from certain public activities and spaces, the country’s top court has decided
    • The country’s coronavirus immunization plan did little to assuage concerns that the government is stumbling in its efforts to inoculate 212 million people
    • The federal government is said to have decided to buy the Coronavac vaccine, developed by China’s Sinovac and produced by Butantan Institute in Sao Paulo
    • Policy makers expect inflation to accelerate toward the target in the next two years, even with higher interest rates, according to the central bank’s quarterly inflation report
  • Chile’s government took a step to taming currency volatility with a bill that aims to reduce market swings triggered by changes in local pension-fund research companies’ reports
    • Chile won’t be able to reach a goal of vaccinating 80% of the population before June 30 due to logistical issues, said Health Minister Enrique Paris
  • Colombia’s central bank held its benchmark rate at a record low in a split decision with two board members voting for a borrowing cost cut following a plunge in inflation
  • Ecuador’s lawmakers voted to approve anti-corruption legislation that was central to an agreement with the International Monetary Fund to free up disbursal of $2 billion
  • Fitch Ratings cut its outlook on Peru’s foreign debt for the first time in almost two decades as “populist” congressional spending measures undermine public finances battered by the pandemic

  • Argentina is said to be seeking about $5 billion for next year from multilateral organizations other than the IMF as it negotiates a larger refinancing program with the Washington-based lender

    • The nation’s economy grew 12.8% in the third quarter from the previous three months, less than the 13.2% estimate
    • Argentina’s Chubut province bondholders approved the government’s debt restructuring proposal
  • Peru’s central bank approved measures to boost mortgage lending and increase liquidity in the financial system as it looks to fuel an economic rebound
  • Biden’s advisers are said to be preparing for potential negotiations with Nicolas Maduro’s regime in Venezuela in an effort to end the Western Hemisphere’s worst economic and humanitarian crisis
Upcoming data and economic releases:
  • For Asia, clickhere
  • For Eastern Europe, click here
  • For Latin America, click here

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