Emerging-market stocks and currencies are heading for their worst
month since August amid concerns about the impact of the coronavirus on
global growth. The following is a roundup of news and highlights in
developing economies for the week ending Jan. 31.
Highlights:
- The World Health Organization called the outbreak of coronavirus in China a global health emergency,
citing the risk that the sometimes-deadly virus could expand to other
countries beyond the smattering of cases outside China so far
- The first official indicator of the Chinese economy in 2020 signaled the nation’s factories were struggling even before the country shut down for the Lunar New Year holidays and the coronavirus outbreak worsened
- Direct impact of the coronavirus outbreak is mostly on demand
as people stay home, while on supply side there have been transport
stoppages and workers idled, International Monetary Fund spokesman Gerry
Rice said
- Federal Reserve Chairman Jerome Powell signaled the central bank
would pull out all the stops to combat a global disinflationary
downdraft, foreshadowing a potential shift toward an easier monetary policy
- Republican Senator Lamar Alexander said he will vote against
calling witnesses in President Donald Trump’s impeachment trial, all
but closing off chances that Democrats can secure new evidence and
making it increasingly likely the trial will wrap up as soon as Friday
- Hungary left its monetary policy unchanged as central bankers looked past the weakest forint on record in anticipation that surging inflation will slow
- The U.S. and Kenya are expected to announce negotiations on a free-trade agreement, America’s first such deal with a sub-Saharan country, a person familiar with the plans said
- Kenya’s central bank joined its South African counterpart by unexpectedly cutting
interest rates, citing well-anchored inflation expectations and an
economy that’s operating below its potential. The monetary policy
committee reduced its key rate to 8.25% from 8.5%
- Inflows to exchange-traded funds focused on emerging markets slumped to the lowest in seven weeks as a deadly virus from China spread throughout the world
| Asset Moves as of 3:31 p.m. in Singapore on Friday: |
Weekly |
January |
| MSCI EM stocks index |
-4.4% |
-4.0% |
| MSCI EM FX index |
-0.7% |
-0.9% |
| Bloomberg Barclays Global EM Local Currency bond index (up to Thursday) |
-0.3% |
+0.2% |
Asia:
- China’s onshore markets were shut for the extended Lunar New Year holidays
- The spread of the novel coronavirus may negatively affect South Korea’s economy, and sufficient and swift budget support is needed to prevent that, Finance Minister Hong Nam-ki said
- South Korea will take steps to stabilize markets in case the fear of the coronavirus expands, Vice Finance Minister Kim Yong-beom said
- Confidence among consumers jumped to the highest level since June 2018 in January
- The nation’s industrial output rose in December the most in three years and semiconductor stockpiles dropped
- The U.S. military has begun issuing furlough warnings
to almost 9,000 civilian South Korean employees, as Washington and
Seoul remain at loggerheads over President Trump’s demand its ally pay
more money for its hosting of American troops
- U.S. Trade Representative Robert Lighthizer will be in India in the second week of February to finalize a trade deal ahead of Trump’s expected visit, according to people with knowledge of the matter
- India has set up coronavirus screening across 21 airports and in border states
- The Reserve Bank of India nominates Janak Raj as monetary policy panel member
- India’s Finance Ministry officials recommended
the government cut some subsidies and reallocate spending to sectors
where it can help spur demand in the economy, according to people
familiar with the matter
- Foreign direct investment into Indonesia rose 7.7% to 423.1 trillion rupiah ($31 billion) last year from 392.7 trillion rupiah a year earlier
- Bank Indonesia projects economic growth of 5.5%-6.1% in 2024
- Central banks cannot be the only game in town amid unprecedented uncertainty and global slowdown, according to Bank Indonesia Governor Perry Warjiyo
- The central bank continued to intervene in the markets to stabilize rupiah
- Thailand’s government said it will consider new steps to support the economy, which is on course for disappointing performance because of the coronavirus outbreak, a stalled budget and a sapping drought
- The Tourism Authority of Thailand expects the number of Chinese visitors to fall by “at least 2 million” amid the outbreak of virus, TAT Governor Yuthasak Supasorn said
- Thailand “can 100% control” the spread of the novel coronavirus that originated in China, but won’t be complacent, Prime Minister Prayuth Chan-Ocha said
- The Finance Ministry cut its 2020 economic growth forecast to 2.8% from its October projection of 3.3% and sees the baht averaging 30.50 per dollar this year
- The Bank of Thailand cut the auction size
for some bills and bonds. The maximum issue size per auction for three-
and six-month bills and two-year bonds is reduced, the central bank
said
- The nation’s court accepted case seeking ruling on budget vote’s validity
- The Philippine central bank will go slow on monetary easing this year on signs that economic growth will stay robust and inflation will remain stable, Governor Benjamin Diokno said
- The virus outbreak could hurt Malaysia’s economy and the nation will monitor food trade movement to safeguard the safety of Malaysians, Economic Affairs Minister Azmin Ali said
- The outbreak of the coronavirus is unlikely to affect
Taiwan’s investments or exports as Taiwanese companies with operations
in China may accelerate repatriation of investments back to Taiwan,
National Development Council Deputy Minister Cheng Cheng-mount said
- President Tsai Ing-wen said she has instructed
her administration to prepare measures to stabilize equity and
foreign-exchange markets to weather the impact of the coronavirus on the
economy
- Economic growth outlook and repatriation of funds by Taiwanese companies indicate ample momentum, Taiwan’s Minister of Finance Su Jain-rong said
- At least 5 board members of Taiwan’s central bank said they see no need to cut rates, according to the minutes of the Dec. 19 meeting released Thursday
EMEA:
- Polish economic growth slowed to its worst in three years in 2019, a result that suggests the expansion decelerated to below 3% on an annual basis in the last quarter
- The European Union’s top official for judicial affairs pressed Poland to help find a solution to their clash over the rule of law, which legal experts warn can isolate the ex-communist country from the rest of the bloc
- Turkey’s central bank made no changes to its inflation outlook
for the end of this year and next, reinforcing a message of confidence
that it’s keeping a lid on prices despite a pickup in cost pressures and
rapid-fire cuts to interest rates under the new governor
- President Recep Tayyip Erdogan voiced rare recent criticism of Russia for its conduct in Syria, saying his “patience is running out” over the ongoing bombing of opposition Islamist forces in Idlib province
- Turkey will take additional measures
against “terror attacks” on civilians and its troops in Syria,
especially in Idlib, despite agreements with “active nations,” according
to National Security Council meeting declaration released late Thursday
- Moody’s Investors Service said it is looking for signs of a credible medium-term vision
for South Africa and said it’s “a bit early” to judge the government’s
policy and structural reforms after changing its outlook on the
country’s credit ratings to negative almost three months ago
- South Africa has no fiscal space left and must implement strong budget consolidation and state-owned company reforms to ensure its debt sustainability, the IMF said
- Saudi Arabia is “closely monitoring” the effect of the Chinese
coronavirus outbreak on the oil market, but so far believes the crisis
will have a “very limited impact” on global demand
- Russia plans to help Lebanon cope with its financial crisis and is considering a $1 billion deposit with its central bank, Beirut-based Al-Akhbar newspaper reports, citing information it obtained
- The United Arab Emirates reported the first cases of the novel coronavirus in the Middle East on Wednesday
- The Bank of Angola left its key rate unchanged at 15.5%
- Economic growth in Rwanda could accelerate to more than 10%
this year if construction of a planned $1.3 billion airport starts,
according to the World Bank, which increased its estimate for 2019
expansion for a second time
- Zimbabwe’s government has approached the U.A.E. in hopes of selling a stake in its national oil company,
according to three company and government officials familiar with the
plan. It also wants companies in the U.A.E. to buy more of its gold,
they said
Latin America:
- Argentina’s government has laid out a timeline for its debt negotiations with private creditors, but analysts are skeptical about its ability to meet the March 31 deadline to wrap up talks with bondholders
- The IMF expects to send staff to Buenos Aires in February for a technical mission as Argentina’s record $56 billion credit line remains on hold
- The Province of Buenos Aires improved the terms it’s offering bondholders if they agree to accept delayed payments
- Central bank lowered the floor
of its benchmark interest rate for the fifth time under President
Alberto Fernandez in an effort to stimulate growth and make credit more
accessible.
- Central bank is forecasting a “significant” slowdown in inflation after consumer prices rose 54% last year
- Brazil’s Lower House speaker Rodrigo Maia said the tax reform bill is expected to be voted on in April
- Rapporteur of tax reform in the Lower House said Congress aims to pass the bill in both the House and the Senate in the first half of the year
- Economy minister Paulo Guedes said the government will send a public sector reform proposal to Congress and will do everything to get the tax reform approved this year
- Brazil economists lowered their forecasts for both the key rate and inflation this year after activity data disappointed
- Country received $3.7 billion in foreign direct investment Jan. 1-23, the central bank’s statistics department head said
- Chile kept its benchmark rate unchanged as the worst social unrest in decades clouds the outlook for economic growth and saps demand for the peso
- Congress approved a tax bill presented by the administration of President Sebastian Pinera to fund its social agenda and ease months of social unrest
- Mexico’s economy was flat
in the fourth quarter as industrial output shrank, capping an economic
contraction in 2019, the first year of President Andres Manuel Lopez
Obrador’s term
- Trump signed into law
a new trade pact with Canada and Mexico on Wednesday, sealing a
political victory that will help neutralize Democratic attacks on his
economic record
- Retail sales rose 2.1% in November from a year ago, exceeding a 0.4% forecast
- Peru’s “disappointing”
2019 economic growth figure didn’t accurately reflect strong numbers
posted in several key areas, central bank President Julio Velarde said
- A split new Congress in Peru and a dramatic collapse
in support for the opposition Fujimori family may smooth the path of
President Martin Vizcarra as he tries to pass economic and judicial
reforms in his final 18 months in power
- Bolivia has depleted
its “war chest” of international reserves to the point that it no
longer has enough dollars to defend the nation’s fixed exchange rate,
according to Fitch Ratings
https://www.bloomberg.com//news/articles/2020-01-31/worst-month-since-august-in-sight-amid-virus-outbreak-em-review
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