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The growing threat of a Greek exit from the euro-zone has cast a shadow over the outlook for European frontier markets. Admittedly, the reaction in financial markets has so far been muted. And the problems in Greece pose little threat to frontiers …
25th June 2015
With a Fed rate hike sometime this year now widely anticipated, we suspect that any volatility in EM markets when the Fed finally raises rates should prove short-lived. The much bigger risk for emerging markets is that US policymakers tighten policy more …
23rd June 2015
Most of the weakness in emerging market exports in recent months can be pinned on the impact of lower commodity prices and the strength of the US dollar. But there are lingering concerns surrounding the state of external demand. … Weak EM exports keep …
18th June 2015
Yesterday’s statement by US Fed officials suggests that the FOMC is still on course to raise interest rates at September’s meeting. EM financial markets have taken this in their stride today and, broadly speaking, we think this is justified. However, a …
Emerging market dollar-denominated government bonds have significantly underperformed their local currency counterparts since the end of April. However, this has generally been due to a surge in underlying US Treasury yields rather than increases in …
11th June 2015
The fall in oil prices hasn’t so far been the boon for household spending in the emerging world that might have been expected, but it does appear to have contributed to stronger private consumption in countries where fuel makes up a large share of …
8th June 2015
May’s manufacturing PMIs brought the first signs that the recent slump in manufacturing across the emerging world may be bottoming out. But there remain huge differences in performance. May’s improvement was in large part due to an uptick in India and …
2nd June 2015
The slowdown across emerging markets is showing no sign of easing, with our latest GDP Tracker suggesting that growth is now running at 3.7% y/y – its lowest rate since September 2009. Much of the weakness remains concentrated in the larger BRIC …
28th May 2015
First quarter GDP data that have so far been released by EMs have painted a pretty grim picture. In this Update we outline the three key themes that have emerged. … Taking stock of a grim …
27th May 2015
Most emerging economies have made a weak start to the year. The Q1 GDP data released so far point to a slowdown in aggregate EM economic growth and early activity data for April suggest that this has carried on into Q2. The largest EMs, in particular, are …
22nd May 2015
Despite a recent rebound, low oil prices are posing a challenge for many frontier markets. Low oilprices were one factor that led the IMF to cut its 2015 growth forecast for Sub-Saharan Africa, andwe believe that the Fund is still overly optimistic. …
20th May 2015
Several factors help explain why the dollar value of exports from emerging markets fell sharply in March, including lower commodity prices, the strength of the US dollar and distortions in China’s trade data. But the incomplete data so far available for …
19th May 2015
Although underlying Treasury yields have risen since the end of March, dollar-denominated corporate bond yields have fallen in all emerging market regions, owing to a sharp fall in credit spreads. We think these spreads will remain low even if Treasury …
15th May 2015
While it isn’t hard to find EMs that have been hurt by the slowdown in China, identifying winners from the positive aspects of its rebalancing – such as rapid growth in household spending – has proved much harder. Nevertheless, there are at least some …
14th May 2015
The outlook for consumers has remained bright in large parts of the emerging world. In particular, consumption looks set to grow strongly in Central Europe and Emerging Asia over the coming months. In contrast, consumers in Russia and parts of Latin …
13th May 2015
The sell-off in the bond market in developed economies that grabbed the headlines over the past few weeks has also hit emerging markets but, so far at least, it does not provide much cause for concern. If bond yields continue to rise, governments in those …
12th May 2015
According to our GDP Tracker, EM growth has now fallen to a low last seen in the aftermath of the 2008-09 global financial crisis and, prior to that, the 2001-02 Argentine crisis. However, the causes of the latest downturn are very different from previous …
11th May 2015
Manufacturers across the emerging world appear to have continued to struggle in April, according to the latest PMI data. The slowdown was driven by weakness in the larger BRIC economies. Meanwhile, although PMIs also dropped back in some of the smaller …
5th May 2015
Our GDP Tracker suggests that EM growth has dropped below 4% y/y for the first time since the global financial crisis, and only the second time in almost 15 years. What’s more, with China’s slowdown taking its toll on other EMs, growth is likely to weaken …
1st May 2015
EM growth appears to have sunk to a post-crisis low of around 4% y/y in the first quarter of this year, driven in large part by a deepening downturn in the BRICs. China has grabbed most of the headlines over the past few weeks, although we suspect that …
23rd April 2015
There is a good chance that emerging market GDP, measured in dollar terms, will fall this year. But while this will weigh on investors’ dollar-denominated returns and could raise debt burdens in EMs with large dollar liabilities, for most EMs it won’t …
21st April 2015
The effects of slower growth in China are already rippling across the emerging world. Indeed, while China’s economy is still growing by anywhere between 5–7% y/y depending on whose numbers you choose to believe, imports from all but a handful of EMs are …
20th April 2015
Emerging market equities have delivered strong returns in the past month, outperforming their developed market counterparts. A confluence of factors is probably responsible. This includes signs of stabilisation in commodity prices at lower levels, an …
17th April 2015
Although EM exports contracted less sharply in February, the improvement was almost entirely down to a surge in China’s exports, which have been distorted by shifts in the timing of Chinese New Year. More timely data suggest that exports plunged again in …
16th April 2015
We have been warning about the dangers stemming from rapid credit growth in several EMs for a while. In this Focus we revisit the possible lessons from history. Three points stand out – with potentially ominous implications for China, Brazil, Korea, …
15th April 2015
The wave of EM policy loosening that was triggered by the drop in oil prices at the end of last year is now reaching an end. However, it won't be until 2016 that most central banks move into tightening mode, and the shift will be gradual. … Window for …
14th April 2015
The recent strength of the dollar has thrust EM dollar debts into the spotlight, but data on the subject tend to be misunderstood. In this Update, we answer three questions that we have been asked by clients in recent weeks in order to provide some …
8th April 2015
The latest PMI data suggest that manufacturing activity across the emerging world slowed further last month, driven mainly by weakness in some of the larger EM economies. By contrast, manufacturers in Mexico and Central Europe continued to record a strong …
3rd April 2015
The recent run of poor data from around the emerging world is likely to set the tone for the rest of this year. Brazil’s struggles look set to continue, Russia is likely to slip deeper into recession and a property slowdown will continue to weigh on …
2nd April 2015
The prospects for the four largest emerging economies – Brazil, Russia, India and China – are starting to diverge. The outlook for India is improving and, despite a recent run of poor data, we think the risks of a hard landing in China are actually …
27th March 2015
Our GDP Tracker suggests that EM GDP growth has remained stuck at just over 4.0% y/y in recent months – a low not seen since the aftermath of the global financial crisis. However, the aggregate figure mask increasing divergences at a country-level. Growth …
25th March 2015
The hardest hit EM currencies over the course of this year have been those of the economies with low domestic savings rates. In the absence of reforms to address this frailty, the currencies of low-saving economies – notably, Brazil, Turkey and South …
20th March 2015
The rally in EM currencies following the conclusion of yesterday’s FOMC meeting has proved to be short-lived, with markets seemingly focussing on the fact that the Fed has paved the way for a June rate hike as opposed to the downward revision to its …
19th March 2015
Fears over the outlook for emerging markets have resurfaced over the past few days, with the latest concerns focusing on the impact that a strong dollar will have on EM balance sheets. In our view, much of the doom and gloom is overdone. For most EMs, …
17th March 2015
The value of EM exports fell at the sharpest rate in more than five years in January. The timing of Chinese New Year was partly to blame, and an improvement is almost guaranteed in February, given the strength of the rebound in China's exports last month. …
12th March 2015
The fall in emerging market currencies since the beginning of this year has picked up pace this month. Two main forces appear to have been at work. First, the depreciation of the euro has led the currencies of countries in Central and Eastern Europe (CEE) …
11th March 2015
Most EM currencies have weakened substantially against the US dollar this year. For a few EMs with large dollar debts, such as Turkey, this could lead to financial strains. And the impact of currency weakness on inflation may cause headaches for …
10th March 2015
The fragile five have been whittled down to three as economic reforms have helped to reduce the vulnerability of the Indian rupee and Indonesian rupiah to the recent bout of emerging market currency weakness. But the Brazilian real, Turkish lira and South …
9th March 2015
Our updated Capital Economic Risk Indicator (CERI) reports that the overall level of emerging market (EM) risk remains at a decade low, but that concerns remain about a handful of countries. Venezuela already appears to be suffering an economic crisis, …
5th March 2015
The latest PMI data suggest that manufacturing growth across the emerging world remained stable, yet sluggish, in the first couple of months of this year. Some of the larger EMs are still struggling but activity in smaller EMs with export-oriented …
4th March 2015
Our GDP Tracker suggests that aggregate EM GDP growth has dropped to just 4.0% y/y – a low not seen since the aftermath of the global financial crisis in 2009. Much of the latest slowdown appears to have been caused by weakness in Russia. In contrast, …
26th February 2015
The impact on EMs of a Greek exit from the euro-zone would depend on the extent to which policymakers in Europe were able to limit the wider financial fallout. A “managed” exit would create significant problems for the handful of EMs with strong financial …
20th February 2015
Inflation across the emerging world has been heading in different directions in recent months. In Latin America and Emerging Europe it has risen, led by increases in regulated prices in Brazil and the pass-through from a much weaker rouble exchange rate …
19th February 2015
Concerns about the rapid growth of private sector debt in EMs have resurfaced in recent days. Our view remains unchanged: fears that a debt crisis will engulf the entire emerging world are overdone but financial risks are building in several places, …
17th February 2015
The “stripped” spread of the JP Morgan EMBI Global Index, which includes the dollar denominated debt of 61 emerging market governments, is still around 430bp despite falling slightly in recent weeks. This is close to its level at the end of 2003, even …
12th February 2015
The value of EM exports continued to fall in annual terms in December, with oil producers faring especially poorly. The early signs are that Asia's manufacturing-oriented economies will report weak trade figures for January, but this will be due in large …
The US dollar’s recent strong run has raised concerns that EMs with large holdings of dollar-denominated debt will come under pressure. Indeed, India’s central bank governor, Raghuram Rajan , has gone so far as to warn that borrowing in US dollars “is …
11th February 2015
Today’s decision by the People’s Bank of China to lower reserve requirements underlines the current heightened risk of policy surprises in the EM world. We continue to think that any further surprise moves are more likely to be directed towards looser …
4th February 2015
The latest PMI data suggest that manufacturing activity across the emerging world was stable, but still sluggish, at the start of this year. However, while manufacturers in the BRIC economies are struggling, there are tentative signs that those in …
3rd February 2015
Our GDP Tracker suggests that aggregate EM GDP expanded at a modest pace of just over 4% y/y in November as the BRIC economies continued to disappoint. Meanwhile, the latest activity figures provide more positive signs from some of the smaller EMs. … …
30th January 2015
