Emerging Markets: Preivew of the Week Ahead

(from my colleague Dr Win Thin)

EM FX was mostly firmer
last week, helped by Trump comments and softer US data.  Whilst this seems
positive for EM, the global backdrop remains uncertain.  Some in EM
(Russia, Turkey, and Korea) remain vulnerable to geopolitical concerns. In addition, idiosyncratic domestic political risks remain in play for
other EM countries, such as Brazil, South Africa, and Turkey.  We expect
the investment climate for EM to remain challenging this week.
Singapore reports March trade Monday, with NODX expected to rise 8.1% y/y
vs. 21.5% in February.
 Despite firmer data, the MAS left policy
unchanged last week and maintained its commitment to keep policy loose for an
“extended” period.  If data continue to firm, we expect a change in the
forward guidance at the October meeting that sets the table for a 2018
tightening move.  
China reports March retail sales and IP Monday.  The former is expected to rise 9.7%
y/y, while the latter is expected to rise 6.3% y/y.  Q1 GDP will also be
reported then, with growth expected to remain steady at 6.8% y/y.  
India reports March WPI Monday, which is
expected to rise 6.0% y/y vs. 6.55% in February.
 Last week, March CPI came in at 3.8% y/y, lower
than expected but still faster than 3.65% in February.  RBI is clearly in
hawkish mode, and is likely to continue tightening gradually.  Next policy
meeting is June 7.  If price pressures continue to rise, another 25 bp
hike seems likely.  

Brazil central bank releases minutes from
last week’s meeting
Monday.  At
that meeting, it cut 100 bp and implied that this pace would be maintained for
the next meeting or two.  Brazil then reports mid-April IPCA inflation Thursday,
which is expected to rise 4.48% y/y vs. 4.73% in mid-March.  Next COPOM
meeting is May 31, and another 100 bp cut to 10.25% is likely. 

Colombia reports February IP and retail
sales Monday.
 The former is
expected at -1.3% y/y, while the latter is expected at -1.6% y/y.  The
economy remains weak, and so the central bank is likely to continue cutting
rates.  Next policy meeting is April 28, and another 25 bp cut to 6.75%
seems likely.  
Malaysia reports March CPI Tuesday, which is expected to rise 5.2% y/y
vs. 4.5% in February.
 The central bank does not have an explicit
inflation target, but rising inflation will make it hard to keep policy steady.
 Policymakers are concerned about sluggish growth and so for now, we see
steady rates.  Next policy meeting is May 12, no change is expected.

South Africa reports March CPI Tuesday,
which is expected to rise
6.4% y/y
6.3% in February.  This would be above the 3-6% target
range and yet for now, SARB is on hold.  The weak economy should dictate
lower rates, but high inflation is preventing this for now.  Next policy
meeting is May 25.  What SARB does then will in depend on both internal
and external factors. 

Taiwan reports March export orders Thursday, which are expected to rise 10.7%
y/y vs. 22.0% in February.
 Regional trade has been robust in recent
months, and orders data suggest this will continue into H2.  For now, the
central bank is likely to remain on hold as price pressures are steady.  
Poland reports March industrial and
construction output, retail sales, and PPI Thursday.
 Data are expected to show continued strength in
the economy.  Central bank minutes will be released Friday.  It has
maintained a dovish stance, but its desire to keep rates steady until 2018 will
be tested by rising inflation and a robust economy.  We believe the first
rate hike may be seen in H2 of this year.

Bank Indonesia meets Thursday and is expected to keep rates
unchanged at 4.75%.
 Its tone has become more hawkish lately in
response to rising inflation.  CPI rose 3.6% y/y in March, which is within
the 3-5% target range.


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