(from my colleague Dr. Win Thin)

In the EM equity space as measured by MSCI, Hong Kong (flat), South Africa (flat), and China (-0.2%) have outperformed this week, while Mexico (-5.9%), Brazil (-5.2%), and Turkey (-4.7%) have underperformed.  To put this in better context, MSCI EM fell -1.7% this week while MSCI DM fell -0.5%. 

In the EM local currency bond space, Philippines (10-year yield -6 bp), India (-4 bp), and Czech Republic (-2 bp) have outperformed this week, while Turkey (10-year yield +109 bp), South Africa (+13 bp), and Poland (+12 bp) have underperformed.  To put this in better context, the 10-year UST yield fell 2 bp to 2.96%. 

In the EM FX space, EGP (+0.4% vs. USD), PHP (+0.4% vs. USD), and PKR (flat vs. USD) have outperformed this week, while ARS (-5.8% vs. USD), TRY (-4.7% vs. USD), and MXN (-3.1% vs. USD) have underperformed.  To put this in better context, MSCI EM FX fell -0.6% this week. 

Bank Indonesia is taking measures to stabilize the local bond market. The bank said it will buy bonds in the secondary market if fresh selling pressures emerge. It added that it is open to reviewing its scheduled borrowing this year, noting that it has already completes nearly 50% of its gross borrowing target at the end of April. The bank failed to meet its sales target in the previous two auctions. 

The Philippine central bank is tilting more hawkish. Governor Espenilla said that he was “very concerned” with April CPI data (4.5% y/y and further above the 2-4% target range. This follows comments from him earlier this week expressing concern that price pressures are spreading into the wider economy. Next policy meeting is May 10 and markets are pricing in a 25 bp hike to 3.25%, the first move in this tightening cycle. 

Czech National Bank cut its inflation forecasts and suggested that the pace of tightening will slow.  The bank sees inflation slowing to 1.5% in Q4 2018 vs. 2.2% forecast in February. Governor Rusnok noted that the new forecast implies that the next rate hike will happen near year-end, “say, in the fourth quarter.”  He added that an earlier hike can’t be ruled out if the situation changes. One board member voted to raise rates while six voted against. 

Print Friendly, PDF & Email