(from my colleague Dr. Win Thin)

  • China stepped up efforts to attract more foreign inflows to the onshore bond market.
  • Russia has softened its unpopular pension reform proposal.
  • The African National Congress withdrew an existing land expropriation bill.
  • Moody’s downgraded twenty Turkish financial institutions.
  • Turkey central bank Deputy Governor Erkan Kilimci has reportedly resigned.
  • Moody’s moved the outlook on Egypt’s B3 rating from stable to positive.
  • Argentina President Macri asked the IMF to accelerate disbursement of its $50 bln credit line.
  • Argentine central bank hiked rates 15 percentage points to 60% and pledged not to cut until December.
  • Brazil central bank offered the first new auction of FX swaps since June 22.
  • US President Trump announced that the US and Mexico had reached a preliminary trade agreement.

    • In the EM equity space, as measured by MSCI, Egypt (+6.9%), Qatar (+6.7%), and Hungary (+3.1%) have outperformed this week, while Colombia (-3.2%), Chile (-2.7%), and South Africa (-2.1%) have underperformed. To put this in better context, MSCI EM rose 0.5% this week while MSCI DM rose 0.7%. 

    In the EM local currency bond space, the Philippines (10-year yield -36 bp), Chile (-17 bp), and Turkey (-17 bp) have outperformed this week, while Argentina (10-year yield +217 bp), Brazil (+28 bp), and Indonesia (+26 bp) have underperformed. To put this in better context, the 10-year UST yield rose 2 bp to 2.84%. 

    In the EM FX space, ILS (+0.6% vs. USD), KRW (+0.5% vs. USD), and EGP (+0.2% vs. USD) have outperformed this week, while ARS (-18.2% vs. USD), TRY (-9.6% vs. USD), and COP (-3.2% vs. USD) have underperformed. To put this in better context, MSCI EM FX fell -0.2% this week.

    China stepped up efforts to attract more foreign inflows to the onshore bond market. The State Council decided to exempt overseas institutions from paying income and value-added taxes on interest income for three years. Elsewhere, the China Foreign Exchange Trade System began allowing block trades for investments through the bond connect program. Coming a week after the PBOC re-introduced its counter-cyclical factor in the CNY fix, it’s clear that policymakers are not aiming for a weak yuan. 

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