Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

The spread of the coronavirus continues and is likely to weigh on risk assets and EM. Most markets in Emerging Asia are closed for all or part of this week due to the Lunar New Year holiday. China has extended the holiday until February 2 as it struggles to contain the virus. The Asian region is just starting to recover from the global trade tensions, and now it must cope with what is likely to be a sharp drop-off in tourism. Policymakers in the region may have to tilt more dovish this year if the economic impact becomes significant.


Brazil reports December current account and FDI data Monday. Central government budget data will be reported Wednesday, followed by consolidated budget data Friday. The economy remains sluggish, with the CDI market looking for one more potential 25 bp cut in this cycle to 4.25%. Next COPOM meeting is February 5. As the economy picks up, the external accounts should worsen while the fiscal accounts improve.

Mexico reports December trade data Tuesday, where a $2.5 bln surplus is expected. Q4 GDP will be reported Thursday, with the economy expected to contract -0.5% y/y vs. -0.3% in Q3. CPI rose only 2.8% y/y in December, below the 3% target and the lowest since August 2016. The economy remains weak and so the central bank is likely to continue its easing cycle. Next policy meeting is February 13 and another 25 bp cut to 7.0% is expected.

Chile central bank meets Wednesday and is expected to keep rates steady at 1.75%. CPI rose 3.0% y/y in December, right at the 3% target. December IP will be reported Friday and is expected to contract -1.4% y/y vs. -1.8% in December. December retail sales will also be reported Friday and is expected to contract -5.8% y/y vs. -9.8% in December.

Colombia central bank meets Friday and is expected to keep rates steady at 4.25%. CPI rose 3.8% y/y in December, near the top of the 2-4% target range. The economy is a bit sluggish but high inflation warrants caution on the part of the central bank.


National Bank of Hungary meets Tuesday and is expected to keep policy steady. CPI rose 4.0% y/y in December, the highest since December 2012 and right at the top of the 2-4% target range. However, there are signs that that economy is slowing and so we see steady policy this year.

South Africa reports December money supply and private sector credit, PPI, and budget data Thursday. Trade will be reported Friday. The SARB surprised markets with a 25 bp cut at its last meeting. Next policy meeting is March 19. We suspect it will cut rates again but the timing is not yet clear. The February budget statement and Moody’s reaction will be key.

Turkey central bank releases its quarterly inflation report Thursday. It will be studied for clues on future rate cuts. The central bank just cut rates 75 bp to 11.25% this month. While further cuts are likely, the pace of easing will have to slow now that inflation picked up to a higher than expected 11.84% y/y in December. Next policy meeting is February 19 and much will depend on the January CPI print as well as external conditions and the lira. December trade will be reported Friday, where a -$4.3 bln deficit is expected.


Korea reports December IP Friday, which is expected to rise 1.0% y/y vs. -0.3% in November. If so, this would be the first positive reading since July. Bank of Korea delivered a hawkish hold this month by sounding a more upbeat tone on the economic outlook. Next policy meeting is February 27 and steady rates are likely. January trade data will be reported Saturday local time, with exports expected to contract -8.7% y/y and imports by -6.6% y/y.

China reports official January PMI readings Friday. Manufacturing PMI is expected to fall a couple of ticks to 50.0, while non-manufacturing is expected to fall half a point to 53.0. The economy is likely to suffer from the spread of the coronavirus and so policymakers will remain focused on boosting growth.

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Win Thin is the Global Head of Emerging Markets Strategy and has over 25 years of investment experience. He has a broad international background with a special interest in developing markets. Prior to joining BBH in June 2007, he founded Mandalay Advisors, an independent research firm that provided sovereign emerging market analysis to institutional investors. Prior to that, Win was a vice president and international economist, covering major emerging markets in Asia and Latin America for Alliance Capital Management

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