DUBAI: Just when developing economies were ready to bask in the post-COVID rebound in global growth, in sweeps a bond market blaze to scorch them again. Most major investment banks were predicting a stellar 2021 for emerging market assets as long as one crucial snag global borrowing costs rising too fast was avoided. Well guess what, they are on a tear.
By Natalia Gurushina, Chief Economist, Emerging Markets Fixed Income Strategy
China’s activity gauges slowed further in February, but this weakness is likely to be temporary. Activity gauges across EM showed a lot of divergence.
China’s activity gauges undershot expectations in February (see chart below),
but there are good reasons to believe that
the weakness is temporary. First, China’s manufacturing typically moderates during the Lunar New Year due to factory closures. But this year’s celebrations also coincided with the new COVID restrictions, exacerbating the seasonal pattern. Second, many high-frequency indicators (including energy production by six major power stations) already show improvements compared to January. Third, production and business expectations held on extremely well despite the second wave of the movement restrictions. Finally, the global trade is rebounding – as witnessed for example by increasing container supply from China – which is a
Analysis: Emerging markets feel the heat of the bondfire - Netscape Money & Business netscape.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from netscape.com Daily Mail and Mail on Sunday newspapers.
By Natalia Gurushina, Chief Economist, Emerging Markets Fixed Income Strategy
Brazil’s key near-term risk is that the emergency aid bill will be approved without compensatory measures. Mexico’s electricity bill raises further concerns about reforms’ rollback.
The approval of the emergency aid bill is the most important near-term driver for Brazil’s assets. Investors are realists, and they understand that the bill will most likely be watered down. What
worries them much more is that the bill might be split into two parts―emergency spending and compensatory measures―which will be voted on separately. If the bill is approved without the compensatory measures,