(from my colleague Dr. Win Thin)

EM enjoyed a nice bounce to end last week. The global liquidity outlook has clearly moved in favor of EM, at least for now.  However, the overall global backdrop has not shifted in favor of EM just yet. Bottom line: enjoy this EM rally with a short-term time frame in mind, and with the idea that EM turbulence will likely return later this year. 

Idiosyncratic risks abound in the usual suspects. The Brazilian Real is likely to under perform in light of COPOM’s decision to keep rates steady last week. The Turkish lira may also suffer from rising tensions in the region, as Russia appears to be building up its troop presence in northern Syria. The South African Rand could come under renewed pressure as the central bank meets this week.

Singapore reports December CPI Monday, and is expected at -0.7% y/y vs. -0.8% in November. It then reports December IP Tuesday, and is expected at -6.8% y/y vs. -5.5% in November.Q4 unemployment will be reported Thursday. With deflation risks persisting and the economy still slowing, we think the MAS will loosen policy at its April policy meeting by adjusting its S$NEER trading band.

Israeli central bank meets Monday and is expected to keep rates steady at 0.10%. Deflation risks persist, with CPI coming in at -0.0% y/y in December. This is the cycle low and well below the 1-3% target range and so the bank should maintain its dovish stance this year. For now, the bank will probably be happy that the shekel is finally weakening a bit, as that should help stimulate the economy a bit.

Mexico reports November GDP proxy Monday, and is expected to rise 1.9% y/y vs. 2.28% in October.  It then reports November INEGI retail sales Tuesday, and are expected to rise 5.1% y/y vs. 4.8% in October. ANTAD already reported November sales slowing to 6.0% y/y from 9.7% in October, and will also report December sales Tuesday (consensus is 6.5% y/y). December trade will be reported Wednesday.Mexico reports Q4 GDP Friday, and is expected to rise 2.3% y/y vs. 2.6% in Q3.