Emerging Markets: Preview Of The Week Ahead

Emerging Markets: Preview Of The Week Ahead – 3/20/2016

Mar 20, 2016Jeremy ParkinsonFinance0

(from my colleague Dr. Win Thin)

EM ended the week on a mixed note after posting strong post-FOMC gains. The bounce in risk seems likely to continue this week, with little on the horizon to derail it. Specific country risk remains in play, however, with heightened political concerns in Brazil and South Africa.

Taiwan reports February export orders Monday, which are expected at -10% y/y vs. -12.4% in January. It reports February IP Wednesday, which is expected at -5.45% y/y vs. -5.65% in January. The central bank then meets Thursday and is expected to cut rates 12.5 bp to 1.5%. Deflation risks persist, while the real economy is in recession.

Hungarian central bank meets Tuesday and is expected to keep rates steady at 1.35%. CPI rose only 0.3% y/y in February, well below the 2-4% target range. Deflation risks persist, even though the real economy remains fairly robust. Some bank officials have started to talk about policy rate cuts

Singapore reports February CPI Wednesday, which is expected at -0.7% y/y vs. -0.6% in January. It then reports February IP Thursday. Deflation risks persist, while the economy remains sluggish. We expect the MAS to loosen policy at its April meeting by adjusting its S$NEER trading band.

Bank of Thailand meets Wednesday and is expected to keep rates steady at 1.5%. CPI fell -0.5% y/y in February, well below the 1-4% target range. Deflation risks persist, and yet the central bank has remained on hold due to inflation risks from El Nino. If the economy softens this year, the central bank has leeway to tilt more dovish as needed.

Philippines central bank meets Wednesday and is expected to keep rates steady at 4%. CPI rose 0.9% y/y in February, below the 1-3% target range. However, inflation risks from El Nino have kept the bank on hold. If the economy softens this year, the central bank has leeway to tilt more dovish as needed.

South Africa reports February CPI Wednesday, which is expected to rise 6.8% y/y vs. 6.2% in January. This is further above the 3-6% target range and the highest since July 2009. SARB just hiked 25 bp last week to 7%, and said it sees inflation peaking in Q4 of this year. We think tightening will continue at the next policy meeting May 19.