Guest post by my colleague Dr. Win Thin

In a familiar refrain, EM assets are starting off the week on a soft note, with markets picking up where the left off on Friday. With China markets reopening after a two-day holiday, the Shanghai dropped -2.5% and has fed into wider EM equity losses. MSCI EM is down two straight days and five of the past six. The strong US jobs report Friday also brings the Fed lift-off back into focus. Many EM currencies are either making new multi-year lows (IDR, MYR) or making new all-time lows (BRL, TRY). We see more and more currencies following suit in the coming weeks.

Besides the negative global backdrop, idiosyncratic risks remain in play for some of the major EM countries. Political risk is elevated in Turkey, for instance, after another PKK bombing killed several Turkish soldiers. Concerns about Finance Minister Levy resigning are also likely to continue weighing on Brazil markets. All in all, we remain negative on EM due to the perfect storm of negative global developments.

Taiwan reports August CPI Tuesday, and is expected at -0.8% y/y vs. -0.66% in July. August trade came in weaker than expected, with exports contracting -16.7% y/y. The central bank has kept its policy rate at 1.875% since the last 12.5 bp hike back in Q2 2011. The weak economic outlook supports our view that the central bank could embark on an easing cycle at its September 24 quarterly meeting.

China reports August trade Tuesday. Exports are expected at -6.6% y/y while imports are expected at -7.9% y/y. Trade data from other EM countries so far has been very weak, so there are downside risks to the China data. China then reports August CPI and PPI Thursday. The former is expected to rise 1.8% y/y vs. 1.6% in July, while the latter is expected to fall -5.6% y/y vs. -5.4% in July. Markets reopened this week after a two-day holiday.

Hungary reports August CPI Tuesday, and is expected to rise 0.2% y/y vs. 0.4% in July. It also reports July IP, which is expected to rise 5.3% y/y vs. 6.0% in June. The central bank will release its minutes on Wednesday. The economy remains robust, and so the easing cycle has clearly ended. However, we do not think tightening will be seen until H1 2016 as price pressures remain low.

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