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The key determinants of EM political risk premiums are the type of political shock and the strength of an economy’s external balance sheet. With this in mind, Ukraine and Argentina have the greatest potential to suffer large and long-lasting political …
1st May 2019
Aggregate frontier market GDP growth probably slowed to its weakest pace since early 2017 in Q1 and, while we think that this should mark the bottom of the cycle, activity in most frontiers will remain sluggish over the next couple of years. … Growth in …
30th April 2019
The recent sell-off in EM currencies has grabbed the headlines but in truth, aside from the Argentine peso and Turkish lira, the moves have been relatively limited. This Update highlights three key points. … Three key points on the latest EM currency …
The sell-offs in the Argentine peso and Turkish lira have sparked fears of broader turmoil in EM financial markets. But, so far at least, this has yet to materialise. Sovereign dollar bond spreads have actually narrowed over the past month in most major …
29th April 2019
Economic growth in the emerging world appears to have slowed further in the first quarter of this year, to its weakest pace since Q2 2016. Early indicators suggest that activity picked up at the end of the quarter, although we doubt that this is the …
26th April 2019
Turkey’s central bank seems to react like clockwork by tightening monetary policy when the lira falls sharply, but other EM central banks respond much less frequently than is commonly believed. Most will only tend to respond to a currency fall when this …
24th April 2019
Having stagnated in February, there are tentative signs in the March data that the worst has passed for EM exports. But weakness in the global technology sector, lower commodity prices and soft global growth mean that EM exporters are likely to continue …
23rd April 2019
The rally in EM equities has continued over the past month, seemingly driven by the view that recent weakness in the global economy will not last, as policymakers in the US and China in particular engineer a recovery. But we are sceptical, and forecast …
17th April 2019
Our Tracker suggests that overall EM capital outflows eased markedly in Q1. However, we think that positive sentiment towards EMs will start to turn over the coming quarters as worries about weak global GDP growth weigh on investor risk appetite, causing …
In our Risk Monitor published this time last year, we warned about growing risk of crises in Turkey and Argentina. The likelihood of full-blown currency crises occurring in the emerging world now seems much lower. But there are a handful of countries, …
16th April 2019
Rising automation, excellent infrastructure and the migration of some productive capacity into the cheaper interior mean that China is likely to remain a highly competitive export manufacturing centre over the coming years. This will make it much harder …
10th April 2019
The emerging world has entered its first synchronised downturn since 2015. Our growth forecasts remain below consensus in nearly all major EMs. With growth slowing and inflation near a decade low, EM central banks are likely to cut interest rates further …
5th April 2019
The rise in the aggregate EM manufacturing PMI at the end of last quarter suggests that the slowdown in EM industrial production growth may have bottomed out. … EM manufacturing improves at the end of …
1st April 2019
Frontier market currencies have fared better than their emerging market counterparts during the recent market turmoil. But their balance sheets are generally much weaker, making currencies vulnerable to large falls. Indeed, some of the biggest declines we …
28th March 2019
The slowdown in EM GDP growth over the second half of 2018 worsened at the start of this year. EM GDP growth in Q1 is shaping up to be the weakest since Q4 2016. … EM GDP growth slowing in …
27th March 2019
A spell of relative calm for EM currencies was broken this month, as several including the Argentine peso, Turkish lira, Brazilian real and South African rand fell sharply, despite a more dovish US Fed. This weakness can partly be pinned on domestic …
22nd March 2019
The most notable explanation behind the recent sharp slowdown in EM export growth is the fall in commodity prices. But there are signs that softer global demand has also taken its toll. … Picking apart the EM export …
20th March 2019
The slump in EM exports deepened in the first few months of 2019, and with headwinds from low commodity prices and slower global growth likely to persist, we expect exports to remain extremely weak this year. A trade deal between the US and China would, …
15th March 2019
The rally in EM assets of the past few months has started to falter in recent days on the back of some poor economic data around the world, and signs that a US-China trade deal may be further away than previously thought. We forecast that EM assets will …
14th March 2019
The rise in EM sovereign foreign currency bond sales this year has been concentrated in larger EMs with relatively strong balance sheets. We are more concerned about heavy foreign currency public debt burdens – a legacy of FX bond sales in previous years …
13th March 2019
Current account deficits have started to narrow in many major EMs, most notably Turkey and Argentina, reducing the risk of large currency sell-offs. That said, there are a few countries, such as Ukraine and Romania, with relatively large deficits that …
12th March 2019
Our Tracker suggests that overall EM capital outflows eased in February, mirroring the broader improvement in investor sentiment towards the emerging world. But more timely data indicate that this was reversed in early-March – a trend which is likely to …
8th March 2019
The broad tailwinds that lifted growth across the emerging world over the past two decades won’t be repeated and, as a result, GDP growth will be around 2%-pts weaker over the next 20 years. Income convergence with the developed world will continue, but …
7th March 2019
EM inflation slowed to its weakest pace since the Global Financial Crisis in January and it will remain lower over the course of the year in most countries. This is likely to prompt policymakers to loosen monetary conditions. … EM inflation at …
4th March 2019
The EM manufacturing PMI picked up last month, but we think that growth in the manufacturing sector will still slow in the coming months. … Upturn in EM manufacturing won’t be …
1st March 2019
The monetary tightening cycles that began last year in many of the large EMs are petering out fairly quickly. But in many of the smaller Frontier markets, interest rate hikes are still at the top of the agenda. … External pressures keep frontiers in …
27th February 2019
The lesson from Turkey over the last few years is that it takes time for political pressure on the central bank to have negative macroeconomic consequences. With this in mind, while recent developments in India are worrying, we are more concerned about …
The Q4 EM GDP data released so far have generally been a bit stronger than might have been expected, in light of concerns about the health of the global economy. But more timely data suggest that growth weakened in early 2019. … Growth soft at the start …
26th February 2019
We think that the recent rise in the MSCI EM Index, and the particularly strong performance of equities in China and most of the rest of EM Asia, will reverse in the coming months. … EM equities’ strong start to the year not likely to …
22nd February 2019
The economic cycle in most EMs has passed its peak and a combination of domestic headwinds and a slowdown in the global economy means growth will be weaker than most expect across the emerging world. One consequence is that monetary tightening cycles will …
21st February 2019
The weakness of the latest inflation and economic activity data in many emerging markets, combined with growing expectations for looser monetary policy in the developed world, has prompted a dovish shift by many EM central banks. Policymakers in India and …
20th February 2019
The latest figures show that EM export sectors faltered at the end of 2018. Chinese trade numbers for January were surprisingly upbeat, but seasonal effects are probably distorting the real trend. We still think that EM exports will decline later this …
15th February 2019
Our Tracker suggests that the improvement in sentiment towards EMs at the start of this year was accompanied by a pick-up in capital flows in January. It looks like this was concentrated in flows to EM bond and equity markets, and timely figures suggest …
14th February 2019
The slowdown in growth in the emerging world this year is likely to be unusually broad-based. That will set a downbeat mood for EM assets over the course of this year. … EMs facing synchronised …
13th February 2019
The fall in oil prices and shift in interest rate expectations in the US and Europe seem to have brought EM monetary tightening to an end. While most central banks aren’t in a rush to loosen policy, the focus over the coming year is likely to be on …
8th February 2019
We expect EM risk premia to rise this year as global growth slows, something which has often been associated with EM central banks raising interest rates. But big currency falls and surges in inflation this year look unlikely. In fact, lower inflation …
6th February 2019
The sharp fall in the aggregate EM manufacturing PMI last month is consistent with a slowdown in industrial production growth to 2% y/y, from around 4% in 2018. This may be an early sign that EM growth is slowing more sharply than we had anticipated. … EM …
1st February 2019
Frontier dollar bonds have rallied this month, due partly to improved risk appetite, but also progress on IMF deals (Ukraine and Sri Lanka) and the political news flow (Venezuela and Lebanon). But it’s unclear to us that the narrowing of spreads will be …
31st January 2019
Aggregate EM growth slowed to its weakest pace in two years in the middle of Q4, and more timely data point to further weakness. We expect the slowdown to continue over the course of this year. … Slump in Asian industry drags down EM …
29th January 2019
EM export growth slowed sharply in November and the early signs are that the December figures will be even worse. Some of this was due to falls in commodity prices. But much of the weakness appears to have been concentrated in shipments of electronic …
25th January 2019
The slowdown in the global economy has raised fresh concerns about rising EM debt levels. The risks posed by China’s credit boom are now well known, although mitigated by the nature of the lending. Among major EMs, debt vulnerabilities appear most acute …
A number of EMs, particularly in Asia, look vulnerable to the impact of a China slowdown – and are just as exposed as they were when fears of a China ‘hard landing’ flared up in 2015. While we wouldn’t downplay the risks from slower growth in China to the …
22nd January 2019
EM GDP growth has started to slow and will be weaker than most expect in the coming quarters. Domestic strains are growing following previous policy tightening and external headwinds are building, regardless of how the US-China trade war develops. … A …
18th January 2019
Weak EM trade data at the end of last year is a sign of things to come in 2019. We expect that the combination of lower commodity prices and slower global economic growth will cause the US dollar value of EM exports to fall later this year. … EM Exports: …
16th January 2019
China’s government is loosening fiscal policy to cushion the slowdown and it looks like a handful of economies, mainly in East Asia, will also loosen the purse strings this year. However, more EMs are actually likely to tighten fiscal policy, which will …
15th January 2019
2018 was marked by currency crises in Turkey and Argentina, but the risks of large currency adjustments elsewhere in the emerging world have diminished. Meanwhile, sovereign debt risks appear to be rising. … Sovereign debt risks …
11th January 2019
Having experienced capital inflows of almost $150bn in 2017, we estimate that EMs suffered capital outflows of around $70bn in 2018. Our Tracker suggests that the pace of capital outflows eased sharply towards the end of the year. … Emerging Markets …
9th January 2019
The fall in the EM manufacturing PMI last month was fairly broad-based and supports our view that growth in the emerging world as a whole will slow this year. … PMIs point to further …
2nd January 2019
Growth in frontier economies eased over the course of 2018 and we expect activity to be soft in 2019. At a regional level, we think that growth will slow further in frontier economies in Emerging Asia and Emerging Europe next year – the latter will be led …
21st December 2018
EM GDP growth lost momentum over the second half of 2018 and we expect this to continue next year as growth in Emerging Asia, notably China, and Emerging Europe weakens. … EMs set for weaker growth in …
19th December 2018