How is the current macro environment – rising interest rates, a global escalating trade war, and elevated regional sovereign debt – influencing East African markets? John Lentaigne, Chief Underwriting Officer at African Trade Insurance Agency, speaks with Bonds & Loans about the economic outlook in some of the region’s largest economies.
Brazil’s current account balance came in at a surplus of USD435mn in June, below the USD1.3bn surplus registered in the same month last year.
With trade wars and geopolitics-related volatilities engulfing global markets, the GCC finds itself in an unusual role of a relative safe-haven, insulated from the tremors by strong growth and a high oil price. We speak to Tom Koczwara, Director of the Government of Sharjah’s Debt Management Office, about prospects and challenges facing the Emirate.
As the debt capital markets continues to deepen in Nigeria and the fundamentals continue to stabilize, upcoming elections and simmering security threats look set to test investor and borrower conviction.
EM FX has come under pressure again due to ongoing trade tensions and rising US rates, but saw some modest relief Friday after the PBOC announcement on FX forwards. This helped EM FX stabilize, but we do not think the negative fundamental backdrop has changed. Best performers last week were MXN, PHP, and PEN while the worst were TRY, ZAR, and KRW.
EM FX enjoyed a respite from the ongoing selling pressures, with most currencies up on the week vs. the dollar. Best performers were CLP, MXN, and ZAR while the worst were TRY, CNY, and COP. BOJ, Fed, and BOE meetings this week may pose some risks to EM FX.
The Central Bank of Turkey recently published its financial stability report and it tells us a lot about the economic risks and opportunities moving forward more broadly. Manulife analyst Richard Segal provides a digest of the report and assesses the implications for Turkey’s economy.
Economic data has taken a turn for the worse in Brazil following a nationwide truckers’ strike in May and early June that crippled economic activity. Industrial production recorded the largest contraction in almost 10 years in May, and the manufacturing PMI plunged into contractionary territory in June.
Since the turn of the century, two trends have notoriously characterised African economies: world-leading rates of growth and high external debt. East Africa has been at the forefront of this growth spurt, much of which came from the vast volumes of cheap dollar funding streaming into EMs from the low-yield environment in Western economies post-2008. But as the global EM sentiment turns sour and investors abandon riskier regions, those high levels of dollar credit are becoming unsustainable, and fostering growth of local debt markets is becoming increasingly urgent.
EM FX saw some violent swings last week, due in large part to some unhelpful official comments. BRL and TRY were the best performers last week, while RUB and CLP were the worst. When all is said and done, however, we think Fed policy remains unaffected and so we remain negative on EM FX. Also, global trade tensions remain high after Trump threatened tariffs on all Chinese imports entering the US.
- The Coming US Recession Triggers: What You Need to Know
- Corporate Borrowers in India: Stuck Between a Thin Bond Market and Tightening Banks
- Nigeria SWOT Analysis: Rising Oil and Election Jitters Paint Mixed Picture
- EM Bond Outlook: Better 2H 2018 Expected
- GCC Bonds: Is the Worst Behind Us?
20 Sep 2018
12 Sep 2018