Monday, February 1, 2016

Brown Brothers Harriman & Co's Win Thin On Emerging Markets

Via Marc to Market:

(from my colleague Dr. Win Thin)
As we suspected, the current EM bounce still has some legs.  The BOJ’s surprise easing helped EM and risk end on last week on a strong note, and we expect that to carry over into this week.  Within EM, we will start to see the first readings for January.     The biggest risk perhaps is the jobs report on Friday.  Soft US data has helped push out Fed tightening expectations, but a strong reading here could put it back on the radar screen. reports December trade data on Monday.  Exports are expected at -15% y/y and imports at -35% y/y.  The collapse in imports has more than offset the collapse in exports, and so the external accounts are improving.  Brazil then reports December IP on Tuesday, and is expected at -10.5% y/y vs. -12.4% in November.  January IPCA inflation will be reported Friday, and is expected at 10.48% y/y vs. 10.67% in December.

Reserve Bank of India meets Tuesday and is expected to keep rates steady.  However, a very small handful expects a 25 bp cut.  Price pressures have been picking up, and CPI inflation of 5.6% in December is near the top of the RBI’s 2-6% target range.  Comments from central bankers suggest the easing cycle has ended, at least for now.

Turkey reports January CPI Wednesday, and is expected to rise 9.5% y/y vs. 8.81% in December. 
Core inflation is seen basically steady at 9.5%.  Yet with inflation well above the 3-7%, the central bank kept rates steady at the last policy meeting on January 19.  The central bank just raised its 2016 and 2017 inflation forecasts due to the minimum wage hike.  Something has to be done, but we think the central bank’s hands are tied right now.

National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%.  Some of the new members of the MPC are in place, but we think it’s too early to restart the easing cycle at this meeting....MORE