Emerging Markets: Balancing Yuan Inflows and Outflows - BBH

Analysts at BBH shared valuable comments and data on changes in Emerging Markets, "In the EM equity space as measured by MSCI, Turkey (+5.9%), Brazil (+3.1%), and Chile (+2.7%) have outperformed this week, while Indonesia (-2.0%), Russia (-1.4%), and Colombia (-1.2%) have underperformed. To put this in better context, MSCI EM rose 1.7% this week while MSCI DM rose 0.3%."

Key Quotes

"In the EM local currency bond space, Brazil (10-year yield -48 bp), the Philippines (-39 bp), and Colombia (-18 bp) have outperformed this week, while Turkey (10-year yield +17 bp), China (+16 bp), and Hungary (+6 bp) have underperformed. To put this in better context, the 10-year UST yield fell 1 bp this week to 2.42%." 

"In the EM FX space, ZAR (+2.0% vs. USD), KRW (+1.5% vs. USD), and TWD (+1.3% vs. USD) have outperformed this week, while TRY (-3.2% vs. USD), EGP (-2.9% vs. USD), and MXN (-2.1% vs. USD) have underperformed."

"China’s government has asked banks to balance their yuan inflows and outflows. The move comes amidst growing concerns about capital outflows from China. Banks have been asked to show at the end of every month that the amount of yuan outflows matches their yuan inflows. Any banks that have difficulty balancing these flows will have to temporarily halt outbound flows." 

"Indonesia partially lifted a ban on exports of nickel ore and bauxite. Mining companies that are building processing plants locally will be allowed to export. After the ban went into effect in 2014, other producers like the Philippines filled the void left by Indonesia."  

"Czech President Zeman picked two new central bankers as the end of the koruna cap looms. Zeman will name Oldrich Dedek and Marek Mora to the seven-member policy board, replacing Lubomir Lizal and Pavel Rezabek as their terms end. Current forward guidance is for an end to the cap around mid-2017 and is unlikely to be extended. After these additions, five central bankers will be appointees of President Zeman, who has been critical of the cap."

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