30 Jan 2014
Flash: Nerves in EMs will remain on edge - RBS
FXstreet.com (Bali) - According to Greg Gibbs, FX Strategist at RBS, the market will remain wary of the Chinese PMI, adding that while nerves in EMs will remain on edge, there is no reason to expect a further route near term.
Key Quotes
"There is no obvious new catalyst for the further emerging market retreat. The causes are the same that were around a week ago. The Fed taper has been mentioned; it was delivered as expected."
"China has promised to repay investors in the trust product maturing on Friday, so no default and systemic fallout risk is lessened. Several EM markets have raised interest rates to shore up their currencies. Nevertheless the market remains nervous and vulnerable."
"We may see some Consolidation/recovery, but as mentioned yesterday the market will react more to negative economic news or evidence of financial stress, particularly in China."
" The Chinese PMI data out today and over the weekend will keep the market nervous going into the weekend. Today's PMI is an update in the flash HSBC/Markit version that was weaker than expected and was a trigger for the route in EM markets last week."
"On 1-Feb, the Chinese government sponsored PMI which covers a broader section of the economy, incorporating more of the typically more stable larger state-owned companies, is released. The two PMI's do not have a very good correlation, so the result over the weekend could be significantly different (perhaps stronger) and offer some support."
"The PMI data may be influenced by the earlier timing of the Chinese New Year (31-Jan). Perhaps activity was boosted in Jan to get work in ahead of the holiday period that starts in China tomorrow and runs for up to two weeks."
"On occasion the HSBC/Markit flash PMI has been significantly revised, so the data point today may also be influential. The flash PMI was 49.6 (mkt expects the same today). On 1 Feb the market expects the government PMI to slip from 51.0 to 50.5."
Key Quotes
"There is no obvious new catalyst for the further emerging market retreat. The causes are the same that were around a week ago. The Fed taper has been mentioned; it was delivered as expected."
"China has promised to repay investors in the trust product maturing on Friday, so no default and systemic fallout risk is lessened. Several EM markets have raised interest rates to shore up their currencies. Nevertheless the market remains nervous and vulnerable."
"We may see some Consolidation/recovery, but as mentioned yesterday the market will react more to negative economic news or evidence of financial stress, particularly in China."
" The Chinese PMI data out today and over the weekend will keep the market nervous going into the weekend. Today's PMI is an update in the flash HSBC/Markit version that was weaker than expected and was a trigger for the route in EM markets last week."
"On 1-Feb, the Chinese government sponsored PMI which covers a broader section of the economy, incorporating more of the typically more stable larger state-owned companies, is released. The two PMI's do not have a very good correlation, so the result over the weekend could be significantly different (perhaps stronger) and offer some support."
"The PMI data may be influenced by the earlier timing of the Chinese New Year (31-Jan). Perhaps activity was boosted in Jan to get work in ahead of the holiday period that starts in China tomorrow and runs for up to two weeks."
"On occasion the HSBC/Markit flash PMI has been significantly revised, so the data point today may also be influential. The flash PMI was 49.6 (mkt expects the same today). On 1 Feb the market expects the government PMI to slip from 51.0 to 50.5."