Steady as she goes

The latest economic data from across the emerging world have been mixed but our EM GDP Tracker suggests that growth has levelled off at around 4% y/y. While China’s growth has now passed its peak, other economies are picking up the baton. Brazil and Russia’s economies are gradually recovering, and growth in the rest of Emerging Asia remains robust. Consistent with this, financial markets overall have generally held up well. Despite falls in Brazil and Russia’s stock markets, the MSCI EM equity index has edged up a little over the past month, and bond yields have been steady in most countries. What’s more, currencies have shrugged off the Fed’s latest interest rate hike and its plans for balance sheet normalisation. Indeed, despite continuing fears to the contrary, we don’t expect Fed tightening or balance sheet reduction to cause major problems for most EMs.