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Troublesome trio in emerging markets Face return Spike scares

(Bloomberg) – Eight years ago, when the tapering tantrums were dropping emerging markets, the so-called Fragile Five suffered the most in Turkey, Brazil, South Africa, India and Indonesia. A further rise in US government interest rates threatens to wreak havoc on at least three of these nations. The Turkish lira, Brazilian and South African rand led to major global declines last week in the worst developing countries’ currency sales since the end of September. These exchange rates have the highest implied volatility in a week, with some analysts warning of more pain in the future. “Higher US interest rates leave all EMs vulnerable,” said Robin Brooks, chief economist at the Institute of International Finance in Washington. This is particularly the case for “large current account deficits such as Turkey and places where fiscal expansion in 2020 will cause markets to question the need for financing in 2021. The latter will affect Brazil and South Africa,” he said. last week to the highest in more than a year, which led traders to express their expectations of how soon the Federal Reserve will tighten policy. At present, officials emphasize that the central bank has no plans to raise interest rates in view of the long-term weakness in the labor market. This will make Fed Chairman Jerome Powell’s comments on Thursday at a Wall Street Journal event even more interesting. In developing countries, the dollar and local bonds were the worst month since March 2020, while equities showed their biggest weekly decline in almost a year. MSCI Inc’s emerging market stock index slipped below its 50-day moving average, suggesting that further weakness may be ahead of us. Meanwhile, a JPMorgan Chase & Co. trace of asset volatility in developing countries jumped the most last week since early August. Nevertheless, the inflow of exchange-traded funds into the emerging market accelerated last week. Listen to EM Weekly Podcast: Rising Yields Take Toll; China Congress “In the absence of a more coordinated effort to reduce returns, emerging markets may remain under pressure,” said Ilya Gofshteyn, senior strategist at Standard Chartered in New York. “Currencies with higher returns will continue to be particularly negatively affected and the duration of emerging markets is also likely to remain particularly vulnerable.” OPEC + will meet on Thursday and set the stage for another potential conflict between Russia and Saudi Arabia after last year’s oil price. war. On the same day, Malaysian decision-makers are expected to keep their reference rate at a record low of 1.75%. Elsewhere, Turkey may report faster inflation, while a Purchasing Managers’ Index will provide health checks for South Korea. What will WatchChina’s National People’s Congress hold its annual session on March 5 with President Xi Jinping and other senior leaders. This year’s gathering is the 100th anniversary of the founding of China’s Communist Party. The event may last shorter than the usual two weeks due to the pandemic. The proposed agenda includes a review of the economy and the 14th five-year plan, Xinhua reported. The Chinese People’s Political Consultative Conference, an advisory body whose annual meeting is being held in conjunction with the NPC, will meet on March 4, according to Xinhua. The meetings are unlikely to set a GDP growth target but will emphasize “high-quality” growth given that Covid-19 is still widespread outside China, Iris Pang, an economist at ING in Hong Kong, wrote in a note. the best-performing currencies in Asia this year The United States and Saudi Arabia will be monitored after a US intelligence report involved Saudi Crown Prince Mohammed bin Salman to approve the killing of Washington Post columnist Jamal Khashoggi, an act that President Joe Biden called “outrageous” Nigeria the governor of the central bank suggested that the currency be devalued. Governor Godwin Emefiele said the official exchange rate is now $ 410 per dollar. This is 7.6% weaker than the proportion of 379 published on the central bank’s website. Brazilian lawmakers are scheduled to address the debate on emergency dividends The real is the worst performing currency in Latin America this year Bank Negara Malaysia: Malaysia’s central bank is expected to keep its overnight lending rate at a record low of 1.75% on Thursday. Traders are reducing their efforts to further mitigate in the midst of an increase in global bond yields. “Strict social containment measures have dampened Malaysia’s growth recovery,” wrote Kanika Bhatnagar, an economist at Australia & New Zealand Banking Group Ltd. in Bangalore, in a customer note. “Monetary policy will remain accommodating, with the central bank continuing its purchases of government bonds and conducting reverse repo operations.” The ring gout has weakened by 0.9% this year due to an extended locking and a delay in the roll-out of vaccines. At the same time, rising oil prices are starting to improve the outlook for the emerging Asian currency’s sole exporter of raw material Key DataChina’s manufacturing activity fell further in February as the lunar weekend disrupted production, while travel restrictions to contain virus outbreaks reduced spending PMI data released Monday showed manufacturing expanded in Indonesia and Vietnam last month, while it continued to shrink in Malaysia and Thailand. South Korea and Taiwan will report similar data on Tuesday South Korea said Monday that exports increased during a fourth month in February amid the global recovery. The number of industrial production in January is due on Tuesday, and final GDP figures for the fourth quarter are scheduled for Thursday. The winner has lost 3.3% this year. Indonesia said on Monday that consumer prices rose 1.38% compared to the previous year in February. South Korea publishes CPI figures on Thursday and the Philippines and Thailand on Friday The Philippine real return turned negative in January after the CPI rose to its highest level in two years South Korea will post foreign exchange reserves on Thursday, followed by Indonesia, Malaysia, Taiwan, Thailand and the Philippines on friday Turkey’s economy outperformed all comparable companies except China in the last quarter of last year, driven by lower interest rates and a credit boost that increased domestic consumption while the destabilized currency Gross domestic product expanded 5.9% from a year earlier, faster than all G-20 countries except China’s 6.5%, data showed on Monday. The median of 20 forecasts in a Bloomberg survey was for 6.9% expansion. Read more: Policy Jitters Compound Lira’s worst week since 2018 CrisisRussia’s Purchasing Managers’ Index rose in February to 51.5, the highest reading since April 2019 A reading of Brazil’s GDP on Wednesday is expected to show strong growth in the last three months of 2020, as Latin America’s largest economy recovered from the shock of Covid-19. Traders will also monitor January’s industrial production figures, released on Friday, for signs of a comeback. the central bank is likely to raise its GDP growth forecasts for this year and next year when it publishes its quarterly inflation report on Wednesday, according to Bloomberg Economics Colombia’s consumer inflation figures in February are expected to show a decline from a year earlier amid weak domestic demand impact on investors’ expectations that the central bank will remain accommodating Chile’s economy in January Activity fell by 3.1% year-on-year, more than economists expected A reading of confidence will also be seen as a sign of a comeback when vaccines are rolled out (adds information on ETF inflows in the fifth paragraph.) For more articles like this, visit us at bloomberg.comSubscribe now to stay ahead of the most trusted business news source. © 2021 Bloomberg LP