Vaccine Hopes, Biden Transition Boosted Risk Appetite: EM Review

Emerging-market stocks and currencies are heading for their fourth week of gains amid optimism over vaccine developments and a formal start of President-elect Joe Biden’s transition to power. Central banks in South Korea, Nigeria and Sri Lanka held rates steady.

The following is a roundup of emerging-market news and highlights for the week through Nov. 27:

Highlights:

  • Leaders of the world’s richest countries promised to ensure equality in the race to vaccinate people against the coronavirus, even as President Donald Trump stayed quiet on sharing U.S.-made vaccines with other nations
    • A leading Chinese vaccine developer has applied for authorization to bring its Covid-19 shot to the market, seeking to get a jump on Western rivals as the race for a working inoculation against the virus enters the final stretch
    • AstraZeneca Plc’s Covid-19 vaccine looks like it’s headed for an additional global trial as the drugmaker tries to clear up uncertainty and confusion surrounding favorable results in its current study
    • Biden plans to nominate former Federal Reserve Chair Janet Yellen to serve as his Treasury secretary, people familiar with the matter said, choosing the first woman and a seasoned central banker for the nation’s top economic policy job as the coronavirus pandemic threatens another U.S. downturn

    China’s President Xi Jinping broke his silence on Biden’s election victory, sending the U.S. president-elect a message that he hopes to “manage differences” and focus on cooperation between the world’s two largest economies

    • The Trump administration is close to issuing a list of 89 Chinese aerospace and other companies that would be unable to access U.S. technology exports due to their military ties, Reuters reported
    • China’s imports of U.S. goods under the phase-one trade deal slowed last month after hitting a high in September, leaving the full-year target well out of reach
    Asset moves as of 3:52 p.m. in Singapore Weekly
    MSCI EM stocks index +1.8%
    MSCI EM FX index +0.2%
    Bloomberg Barclays global EM local currency bond index (up to Thursday) +0.4%

    Asia:

    • Foreign investors are piling money into major Asian equity markets outside of China at the fastest pace in seven years this quarter
    • The International Monetary Fund’s October acknowledgment of the case for temporary debt monetization in Asia marked yet another example of how the pandemic has upended economic orthodoxy
    • China’s economic recovery stabilized in November, underpinned by solid global demand for exports ahead of the Christmas period and the stock market’s gain to its highest since 2015

      • China confirmed it’s compiling a global watch list of Taiwanese independence backers it plans to “punish”
      • Hong Kong Chief Executive Carrie Lam defended Beijing’s sweeping actions to exert greater political control over Hong Kong while outlining steps aimed at interlocking the two economies; she also said Hong Kong will expand the scope of the China stock connect program
      • China is very likely to exit from some of its stimulus measures as the economy improves, a leading state newspaper said on its front page Thursday; the central bank said it will maintain normal monetary policy for as long as possible
      • The foreign ministers of China and Japan agreed at a meeting in Tokyo to lift some virus-related travel restrictions by the end of the month
      • China will likely return to a more “proper” range of economic development next year, Premier Li Keqiang said
      • The U.K. is considering a ban on the installation of Huawei Technologies Co. 5G equipment as soon as next year to appease hawks pushing for tighter restrictions on the Chinese network equipment maker
      • China is set to impose anti-dumping duties of more than 100% on Australian wine from this weekend, adding to a series of sweeping trade reprisals this year and further escalating tensions with Canberra
      • Household debt rose 2.7% to 1,682.1 trillion won in the third quarter, the fastest pace since 2016
      • The nation’s exporters see the won as too strong and cited currency volatility as one of their key concerns for next year, according to a trade group survey
      • India’s key manufacturing exports may lose market share to a China-backed Asian trade bloc
      • Indian banks are making fresh loans at the slowest pace in at least three years
      • Concern about the depth of India’s recession is slowly being replaced by optimism that a recovery is taking hold
      • The country’s lenders are pushing back against central-bank pressure to further lower interest rates for their customers
      • Indonesia’s central bank will stay focused on supporting economic growth, even as inflation is expected to remain low due to weak demand, Governor Perry Warjiyo said
      • Indonesia’s tax collections from the production sectors are still “under deep pressure” amid the pandemic, Finance Minister Sri Mulyani Indrawati said
      • Thousands of pro-democracy protesters in Thailand gathered outside the main office of the nation’s most valuable lender, in which King Maha Vajiralongkorn is the biggest shareholder, as they push for more transparency and accountability from the monarchy
      • Thailand’s manufacturing production fell 0.54% year-on-year in October, less than economists’ forecast
      • Thailand must check the gains in its currency as it makes it harder for exporters to compete in the global market, according to the nation’s largest industry group

      Economists have slashed their 2020 outlook for the Philippines by more than any other Southeast Asian nation as it struggles with one of the region’s worst coronavirus outbreaks

      • The Philippine government can further loosen movement curbs before year-end to support a recovery from recession
      • Budget deficit was 61.4 billion pesos ($1.3 billion) in October, according to the Bureau of the Treasury
      • The Philippines plans to offer total 120 billion pesos of treasury bills and bonds in December, Bureau of the Treasury says in memorandum to dealers

      Malaysia Prime Minister Muhyiddin Yassin survived a key test of his leadership on Thursday when he won enough support in parliament for his 2021 budget

      • October consumer prices fell 1.5% from a year earlier, the Department of Statistics
      • Palm oil exports fell by 18.66% m/m during Nov. 1-25, according to Intertek Testing Services
      • Exports rose 0.2% in October; median estimate was for a 0.4% decline

      EMEA:

      • Turkey’s central bank raised the amount of lira and FX deposits that commercial lenders must park at the monetary authority, according to a decree published in the Official Gazette
        • The country is lengthening its bond maturities on foreign and local markets as it seizes on investor optimism after President Recep Tayyip Erdogan’s economic revamp earlier this month
        • European Union foreign-policy chief Josep Borrell highlighted the possibility of tougher EU sanctions against Turkey over its activities in the eastern Mediterranean, saying the bloc’s leaders will tackle the matter at a Dec. 10-11 meeting
        • Turkey’s new economic managers are racing to reverse the interventionist policies spearheaded by President Recep Tayyip Erdogan’s son-in-law, but their market-friendly U-turn could initially mean more volatility for the lira

        South African inflation unexpectedly accelerated in October to the highest rate in seven months, driven by food, non-alcoholic beverages, housing and utilities

        • The nation’s business confidence jumped to the highest level in more than two years in the fourth quarter as further easing of lockdown restrictions spurred a resurgence in activity but economic risks could weigh on sentiment in the new year
        • The Public Investment Corp., Africa’s biggest fund manager, is willing to help South African power utility Eskom Holdings SOC Ltd. resolve its debt crisis, Finance Minister Tito Mboweni said at the Bloomberg Capital Markets Focus virtual event Tuesday

        Nigeria’s central bank held its benchmark interest rate to allow previous cuts to flow through the economy, saying Africa’s largest economy should exit its recession by the end of this year

        • The nation’s official exchange rate should not be determined by the parallel market where the naira value has weakened to a three-month low
        • The United Arab Emirates abolished the need for companies to have Emirati shareholders, local media reported, in a major shake-up of foreign ownership laws aimed at attracting investment into an economy reeling from the coronavirus and a decline in oil prices

        Latin America:

        • Brazil’s annual inflation accelerated to 4.22% in mid-November, abov ethe official target, amid higher prices of food and transportation
          • Economists raised their forecasts for both inflation and the key interest rate next year
          • Central bank president Roberto Campos Neto said policymakers are relatively comfortable with inflation
          • Hours after Campos Neto spoke out about Brazil’s budget challenges, Economy Minister Paulo Guedes said his colleague is aware of the government’s plan to boost fiscal credibility and that he should speak up if he has any better ideas
          • Brazil may sell external bonds before the end of the year, the Treasury said
          • Sao Paulo state is considering whether to reimpose more severe restrictions on the movement of people amid the Covid-19 pandemic
          • Annual inflation slowed to 3.43% in mid-November, less than expected by all analysts in a Bloomberg survey, and below the ceiling of the target range
          • Central bank expects economy to shrink 8.9% this year versus its prior forecasts of between 8.8% and 12.8%
          • Mexico may not be done cutting interest rates, according to two members of the central bank board

          Argentina’s Neuquen province reached a debt agreement with creditors, Governor Omar Gutierrez said

          • Economic activity increased 1.9% in September from August, in line with economists’ expectations

          Peru sold $4 billion of bonds, including securities coming due in 100 years, just days after nationwide protests in the wake of Martin Vizcarra’s impeachment

          • The century bonds were sold at the lowest yield for an emerging-market government ever
          Upcoming data and economic releases:
          • For Asia, click here
          • For Eastern Europe, click here
          • For Latin America, click here

          — With assistance by Selcuk Gokoluk, and Philip Sanders

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