Stimulus Optimism to Last Presidential Debate: EM Week in Review

Emerging-market stocks rose last week, the fourth in a row, as U.S. lawmakers negotiated a stimulus agreement. The rally was tempered by rising virus cases around the world as winter approaches in the Northern Hemisphere. Turkey’s central bank unexpectedly kept interest rates on hold, while policy makers in Russia and Hungary also stood pat. China’s recovery from the coronavirus slump continued in the third quarter and showed signs of broadening in September, keeping the economy on track to be the world’s only major growth engine.

The following is a roundup of emerging-market news and highlights for the week through Oct. 25:

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  • House Speaker Nancy Pelosi said the chamber could pass a pandemic relief plan, though a deal with the White House remains elusive and the Republican-led Senate might not act before the Nov. 3 U.S. election.
  • President Donald Trump and Democratic presidential candidate Joe Biden traded charges of secretly taking money from foreign interests, after the former vice president addressed head-on Trump’s efforts to portray him as corrupt
  • A top U.S. intelligence official said Iran and Russia are attempting to interfere with the presidential election, with Iran spreading false information to American voters
  • China’s gross domestic product expanded 4.9% in the third quarter from a year ago, missing economists’ forecast for 5.5% growth. Still, retail sales and industrial production gained momentum in September
    • The yuan advanced to the strongest since July 2018, testing China’s tolerance for gains
    • China is going all out in remembrance of its participation against the U.S. in the Korean War, sending a message to Washington that it’s not intimidated by American military might
  • Turkey raised the upper band of its interest-rate corridor, but unexpectedly left its benchmark on hold, risking further volatility in the lira
    • President Recep Tayyip Erdogan confirmed that Turkey had test-fired its controversial Russian-made S-400 missile batteries, bringing condemnation from the U.S. Defense Department
  • Bank of Russia Governor Elvira Nabiullina kept rates on hold for the second policy meeting in a row
  • Hungary’s central bank kept the interest on its most influential monetary-policy instrument at 0.75% for a third week
  • Thai Prime Minister Prayuth Chan-Ocha ordered the withdrawal of the week-old state of emergency in the capital that barred large gatherings, in a bid to pacify pro-democracy protesters
  • Protests against police brutality in Nigeria, now in their third week, have turned increasingly deadly after the authorities cracked down on the upheaval
  • Protesters clashed with security forces, looted stores and burnt barricades in many Chilean cities on the first anniversary of an outbreak of social unrest
    • Chile voted overwhelmingly on Sunday to draft a new constitution, launching a two-year struggle over first principles expected to blunt the neo-liberalism that has made it an investor favorite but plunged it into riots over inequality
  • Zambia’s entered extra time in its bid to win debt relief from its Eurobond holders after a key group of investors representing 40% of the Eurobonds abstained from voting rather than outright rejecting its debt-standstill proposal
  • Coronavirus cases are surging again in the U.S. and Europe. The seven-day average of U.S. deaths on Wednesday hit the highest in a month, while in Europe, governments have started deploying curfews and other restrictions more widely
  • Argentina’s battle to control its currency is upending South America’s second-largest economy, wreaking havoc on everything from household finances to the production and sale of common goods
    • Two of Argentina’s largest creditor groups excoriated the government for mismanaging the economy, saying the country was headed for disaster just seven weeks after restructuring $65 billion in debt
Asset movesWeekly
MSCI EM stocks index+1.1%
MSCI EM FX index+0.6%
Bloomberg Barclays global EM local currency bonds index+0.7%


  • The Asia-Pacific region is likely to see economic output remain below pre-pandemic trends over the medium term, even as China’s recovery leads the rest of the world, according to the International Monetary Fund
  • China is preparing to grant additional quota for funds to invest in securities overseas, Caixin reported, a move that would allow more capital to flow out of the country
    • China will likely post positive economic growth for the full year and the leverage ratio is expected to stabilize in 2021, the central bank governor said
    • Offshore loan volumes in the Greater China region rebounded in the third quarter
  • India’s Prime Minister Narendra Modi appears to remain as popular as ever even as the country battles one of the world’s worst virus outbreaks
    • Reserve Bank of India Governor Shaktikanta Das said he has tested positive for Covid-19 but is asymptomatic and will continue to work in isolation
    • Support is growing within India’s government to formally start talks on a trade deal with Taiwan
    • India will allow visitors, except tourists, to resume entry
    • India’s government has set aside about 500 billion rupees ($6.8 billion) to vaccinate the country, according to people with knowledge of the matter
    • India’s central bank got more bids for state-issued bonds than it offered to buy back, an early indication of demand at the first such auction, with authorities keen to keep yields in check
  • South Korea’s early trade data showed exports falling in October driven by fewer working days, while daily average shipments continued to recover on resilient tech demand
    • The nation plans monthly issuance of two-year bonds from January
    • South Korea will take market stabilizing measures in case of one-sided movements in the FX market, its finance minister said
    • The central banks of South Korea and China renewed bilateral currency swap agreement and expanded it to 400 billion yuan
  • Thailand’s newly-appointed central bank governor signaled he’s against excessive use of monetary and fiscal policies to tackle crises
    • Thailand’s key equities gauge tumbled to a six-month low on concern anti-government protests will hurt company earnings and delay an economic recovery
    • Finance Minister Arkhom Termpittayapaisith said Thailand will unveil more measures to boost liquidity
  • Indonesia aims to start sovereign wealth fund operations early next year as part of efforts to develop a new business model to help drive growth, according to an official
    • The country is considering to reopen its international borders to regular travelers
    • Investments in Indonesia rebounded in the third quarter as funds shift to islands outside of its economic center of Java
  • Malaysia’s king on Sunday rejected Prime Minister Muhyiddin Yassin’s request to declare a state of emergency to tackle the pandemic, capping a tense weekend that saw opposition leaders criticize the proposal as an attempt by the premier to retain control amid a power struggle
    • Malaysia’s United Malays National Organization party expressed its support for the government in a boost to Prime Minister Muhyiddin Yassin’s leadership
  • The Philippines shortened curfew hours in Manila and eased the stay-at-home order in a bid to boost its economy. The country will also welcome back foreign nationals starting Nov. 1 and allow Filipino travelers to leave without Covid-19 antigen tests as the Southeast Asian nation continues to reopen
    • The government is watching the international market for its next issuance of dollar-denominated bonds
    • Finance Secretary Carlos Dominguez said the economy is projected to shrink by 6% this year while a “strong rebound” is likely in 2021
  • Sri Lanka’s central bank kept borrowing costs unchanged for a second meeting


  • S&P Global Ratings Services cut its assessment of Zambia’s debt to selective default after the nation said it couldn’t meet payments and skipped a coupon on its Eurobonds
  • South Africa is recording a worrying increase in coronavirus infections, especially in the Western Cape province, according to Health Minister Zweli Mkhize
  • Ivory Coast’s ruling party said it will return to international capital markets to help fund a 62 trillion CFA franc ($111 billion) spending plan if President Alassane Ouattara wins re-election this month
  • Oman will need further measures to keep its budget deficit in check, its Finance Ministry said

    • Oman waded back into the international debt market for the first time in more than a year with a $2 billion bond sale after raising the possibility of assistance from its Gulf neighbors
  • A burst of debt deals in the Gulf has pushed issuance to a record in the region as borrowers rush to shore up their oil-dependent budgets before the U.S. election
  • The World Bank anticipates that economies in the Middle East and North Africa will contract more deeply than initially estimated
  • Foreign investors are returning in force to Egypt’s local debt after the coronavirus sparked a selloff, more than doubling their holdings in five months
  • The Bank of Israel will buy 35 billion shekels ($10.4 billion) more in government bonds and provide cheap credit for small businesses to boost the economy
    • President Trump announced Friday that Israel and Sudan agreed to a peace deal
  • Saad Hariri returned as Lebanon’s prime minister, a year after stepping down in the face of nationwide protests
  • Morocco’s long-term foreign currency debt rating was downgraded by Fitch to BB+, one level below investment grade, from BBB-
  • Emirates NBD PJSC braced for credit losses by more than doubling the amount of money set aside in provisions amid the coronavirus pandemic as it reported a 55% slump in its nine-month profit
  • Russia and Saudi Arabia held a second phone call last week to discuss the OPEC+ agreement after officials from the group warned of the potential for a weaker oil market in 2021
    • Russia doesn’t rule out delaying scheduled production hikes by the OPEC+ alliance, President Vladimir Putin said
    • Russia’s daily coronavirus mortality figures understate the real toll from the disease, according to a former employee of the Kremlin’s statistics agency
  • A Ukrainian bond offering was canceled for the second time this year, showing the country’s difficulties in overcoming investor concerns
  • Polish government bond yields have fallen below zero, joining a small number of elite emerging markets in central and eastern Europe with the luxury of getting paid to borrow
    • Polish President Andrzej Duda tested positive for coronavirus, his spokesman Blazej Spychalski wrote on Twitter on Saturday
    • Poland’s new daily coronavirus cases rose to a record
  • The Czech Republic registered a daily record of new Covid-19 cases, confirming the worst current outbreak of the disease in Europe
    • The Czech government’s decision to reimpose a partial economic shutdown to fight Europe’s worst coronavirus outbreak isn’t forcing the central bank to loosen monetary policy further, according to board member Vojtech Bendao
  • Turkey is sticking to its demands that the U.S. transfer missile technology and share production for Ankara following its purchase of a Russian air-defense system that has alarmed NATO partners
    • Turkey’s sovereign wealth fund postponed its debut Eurobond sale due to adverse market conditions that would have likely resulted in a higher cost than expected
    • The Turkish central bank’s double-edged interest-rate decision left most analysts unconvinced
  • Romania reported a new daily record of Covid-19 cases and the most deaths since the start of the pandemic

Latin America:

  • Brazil’s President Jair Bolsonaro stepped up criticism of a Chinese vaccine being developed in partnership with a renowned research institute in his country
    • Consumer prices rose more than forecast in mid-October amid surging food costs, fueling bets the central bank may lift its key rate by early next year
    • Economy Minister Paulo Guedes said he’s fighting to make it clear that the government won’t drop its spending cap
    • Brazil needs to spend less in order to induce growth, central bank President Roberto Campos Neto said
  • Investors are giving up on Argentina just six weeks after it pulled off a $65 billion debt restructuring
    • The country is considering adjustments to its tax and social security structures as part of a plan to address economic imbalances, the Economy Minister said
    • Argentina’s parallel foreign exchange rate hit a record low; exports slowed last month while imports shot up amid the new currency controls
  • Chile’s two-year credit default swaps fell to the lowest level since a wave of protests and riots started a year ago, even as the country braces for a constitutional referendum
  • Mexico’s President Andres Manuel Lopez Obrador said on Friday that the central bank needs to cut interest rates further to help reactivate the economy, even as a spike in inflation is slowing an easing cycle and may end it altogether

    • Mexico’s inflation accelerated above the ceiling of its target range in the first half of October, cramping the central bank’s space for more rate cuts
    • Mexico reached a deal to supply water to the U.S. under a seven-decade-old treaty, ending an escalating conflict
    • The nation’s biggest economic risk is a second wave of Covid-19 infections and there should be more caution at the workplace to prevent that, Finance Minister Arturo Herrera said
  • Colombia plans to present at least seven projects this year that can be financed using part of a $5 billion credit line with a U.S. development bank, according to its top diplomat in Washington
  • Peru’s President Martin Vizcarra criticized a bid by a group of lawmakers to impeach him over bribery allegations, barely a month after an initial attempt to oust him over a separate graft case
  • The government of Venezuelan President Nicolas Maduro is approaching some of the nation’s creditors in a bid to lay the groundwork for a debt deal should sanctions ease after next month’s U.S. election
    • An influential Trump administration official secretly met with a representative of Maduro’s regime in Mexico City in September to try to negotiate the Venezuelan leader’s peaceful exit from power
    • The market for bonds sold by Venezuela’s state-owned oil company could finally be awakening from a months-long slumber
  • Suriname plans to use the 30-day grace period on a coupon payment due Oct. 26, giving it more time to work with external creditors
Upcoming data and economic releases:
For Asia, click here
For Eastern Europe, click here
For Latin America, click here

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