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Published: Sat, 14 Sep 2013 06:30 GMT

Last Build Date: Sat, 14 Sep 2013 06:30 GMT

Copyright: Copyright 2013, Business Monitor International Ltd

More Black-Market FX Weakness Ahead (Emerging Markets Monitor)

Thu, 18 Jul 2013 00:00 GMT

The black-market exchange rate of pesos for US dollars paid in Argentina, also known as the "blue" rate, has begun to weaken again, in line with our view that government efforts would be insufficient to combat depreciatory pressure on the Argentine peso until the authorities substantially revalue the currency. The Argentine government launched a concerted effort to shore up its rapidly deteriorating external account position starting in early May, introducing policies aimed at bringing foreign currency deposits into the financial system in exchange for tax amnesty and investment certificates that could be redeemed for foreign currency at a later date. However, there has been little interest so far in these new investment vehicles, and it appears that demand is once more on the rise for foreign currency, with the "blue" dollar exchange rate falling from ARS7.930/US$ on July 1 to ARS8.750/US$ as of July 17, 60.7% weaker than the official exchange rate of ARS5.445/US$.

Beijing's Credit Crunch Conundrum (Emerging Markets Monitor)

Thu, 20 Jun 2013 00:00 GMT

BMI View: China's money markets are starting to exhibit signs of serious distress within the banking sector, putting China's new regime in an almost impossible situation. Should the authorities decide against injecting yet more liquidity into the system, this would bring into focus the huge asset-liability mismatches and poor balance sheet health of China's major banks, leading to a further spike in the cost of funding and exacerbating the ongoing economic downturn. If Beijing instead chooses to ramp up new credit once more, the risk of stagflation would be acute. On balance, the likelihood of a rapid and prolonged economic downturn is rising, and we are happy to remain bearish financial stocks and the yuan.

Deteriorating Economic Prospects (Emerging Markets Monitor)

Fri, 21 Jun 2013 00:00 GMT

South Africa's economic prospects have deteriorated amid rapid currency depreciation and rising tensions in the critical mining sector. We are forecasting real GDP growth of 2.3% in 2013 and 3.3% in 2014, with risks weighted firmly to the downside.

UAH: Possible Liberalisation Ahead (Emerging Markets Monitor)

Thu, 07 Jun 2012 00:00 GMT

The hryvnia depreciated by 0.62% to 8.08/US$ on June 6, from 8.03/US$ in April, and we expect the currency to trade between the UAH7.9900-8.2000/US$ over Q312, given that the National Bank of Ukraine retains sufficient international reserves to maintain the currency peg over this period. The interbank FX market and hryvnia spot rate are both exhibiting signs of stress at present, although we expect that FX inflows to Ukraine resulting from the hosting of the UEFA Euro 2012 Football championships should alleviate near term pressures. However, we expect pressure to begin rising in advance of the October elections, in light of our expectations for domestic FX accumulation.

CNY View Playing Out, Further Weakness In Store (Emerging Markets Monitor)

Mon, 25 Jun 2012 00:00 GMT

BMI View: Our long-held view of Chinese yuan weakness in 2012 is gaining traction, with our medium-term target of CNY6.4000/US$ now firmly in sight. Moreover, with the technicals, fundamentals and sentiment still pointing to further depreciatory pressure, we reiterate that a more aggressive one-off devaluation cannot be ruled out.

Limited Scope For Progress In Talks With US (Emerging Markets Monitor)

Tue, 31 Mar 2009 00:00 GMT

We do not see much scope for improvement in relations between Myanmar and the new Obama administration in the US as the State Peace and Development Council (SPDC) regime shows no sign of changing its ways. Meanwhile the growing tide of economic migrants returning home after losing their jobs in Thailand poses a risk to political stability.

Rand Weakness Will Prompt Rate Hikes (Emerging Markets Monitor)

Fri, 07 Jun 2013 00:00 GMT

The recent sharp depreciation of the rand will likely feed through to higher inflation via elevated import costs. Consequently, we have altered our outlook for monetary policy and now expect 100bps of rate hikes in 2014 whereas previously we expected rates to be kept on hold over the medium term.

CLP Sell-Off To Hasten Downside For IPSA (Emerging Markets Monitor)

Wed, 05 Jun 2013 00:00 GMT

We maintain our view that a slowdown in the Chilean consumer in 2013 will weigh on the performance of equities in this sector, removing the support that has helped prevent a sharper sell-off in the benchmark IPSA equity index in the last 12 months due to underperforming basic materials stocks (see 'Chart Of The Day: Cencosud's Weakness In-Line With Consumer View,' May 14). Indeed, while we have long forecasted that a deteriorating external environment would negatively affect private consumption in H213, we believe the sharp depreciation of the Chilean peso in recent weeks, which will dampen consumer spending, suggests economic headwinds are materialising earlier than we expected. The MSCI Chile Consumer Staples index has sold-off 10% since the beginning of May, breaking through trendline support around 350 to trade at 342 at the time of writing. As we have previously noted, we believe that the IPSA index may be forming a double-top reversal pattern, with a break of neckline support at 4,100 signalling a major correction (see 'Regional Currency Sell-Off: Drawing Some Initial Conclusions,' May 30). 

Dollar Strength To Erode Export Competitiveness (Emerging Markets Monitor)

Wed, 05 Jun 2013 00:00 GMT

We believe that US dollar strength over the coming years will negatively affect Ecuador's trade competitiveness, compounding a weakening of the country's external accounts. However, we believe an appreciating currency will also help keep inflation low, reaffirming our view that Ecuador will continue to use the dollar as its national currency over our forecast horizon.

Regional Equity Strategy (Emerging Markets Monitor)

Tue, 04 Jun 2013 00:00 GMT

Our bullish 'MSCI Malaysia over MSCI South East Asia' view is up 6.9%. These gains have been driven by the recent declines in the likes of the Thai SET and the Philippines Composite indices, which are showing signs of topping out.

Rand: Retracement Will Be Limited (Emerging Markets Monitor)

Tue, 04 Jun 2013 00:00 GMT

The South African rand has enjoyed a sharp recovery following its precipitous fall through the psychologically important ZAR10.0000/US$ level, but we believe that the retracement will be limited and retain our bearish stance, because the fundamental factors driving its weakness remain in place.

Regional FX And Fixed Income Strategy (Emerging Markets Monitor)

Mon, 03 Jun 2013 00:00 GMT

Indonesia's 5-year credit default swaps (CD) are finally starting to mover considerably. From 121 basis points (bps) when we initiated our call, we have seen spreads gradually widen to 175bps, and we now believe that a significant spike higher is on the cards.

Taking Profit On Bearish NZD, Turning Bullish AUDNZD (Emerging Markets Monitor)

Fri, 31 May 2013 00:00 GMT

We are booking profit on our bearish NZD view versus the US$, and entering a bullish view on the AUDNZD cross rate. Following a 4.6% move in our favour over the past three months, we are happy to take profit versus the US dollar. However, we still expect to see the kiwi to underperform the region over the coming months. With the Australian dollar stabilising on support, AUDNZD could be in for a bounce and we are initiating a bullish view at the current level of NZD1.1930/AUD.

Regional FX And Fixed Income Strategy (Emerging Markets Monitor)

Thu, 30 May 2013 00:00 GMT

While most currencies remain relatively stable, two notable exceptions to this rule are the South African rand (to the downside) and the Malawian kwacha (to the upside). Meanwhile, local debt yields continue to edge slightly lower, but further declines are expected to be muted as inflation concerns are on the rise.

Regional Currency Sell-Off: Drawing Some Initial Conclusions (Emerging Markets Monitor)

Thu, 30 May 2013 00:00 GMT

While we had expected Latin American currencies to roll over since mid-April, the magnitude of the latest sell-off in regional exchange rates has certainly exceeded our own expectations. The size of recent currency moves suggests to us that the macroeconomic headwinds stemming from the global rebalancing forces, which are driving down Chinese demand for commodities, are hitting the region sooner than we had assumed.