(from my colleague Dr. Win Thin)
- PBOC tweaked its process for determining the yuan reference rate.
- Singapore is reportedly studying measures to boost revenue, including higher taxes.
- Moody’s upgraded the outlook on Russia’s Ba1 rating from negative to stable.
- Nigerian President Buhari extended his stay abroad.
- Nigerian central bank tweaked its FX restrictions, but was aimed at retail demand.
- Brazil political risk is back on the table.
- Brazil’s central bank hinted at a faster pace of easing.
- Banco de Mexico announced a new $20 bln FX hedging facility.
In the EM equity space as measured by MSCI, Mexico (+2.7%), India (+1.4%), and Indonesia (+1.3%) have outperformed this week, while Egypt (-5.2%), Hungary (-3.4%), and Russia (-2.0%) have underperformed. To put this in better context, MSCI EM rose 0.5% this week while MSCI DM fell -0.1%.
In the EM local currency bond space, Brazil (10-year yield -18 bp), Mexico (-14 bp), and Hungary (-12 bp) have outperformed this week, while the Philippines (10-year yield +6 bp), Romania (+4 bp), and Russia (+1 bp) have underperformed. To put this in better context, the 10-year UST yield fell 7 bp to 2.35%.
In the EM FX space, MXN (+3.1% vs. USD), EGP (+1.8% vs. USD), and ARS (+1.6% vs. USD) have outperformed this week, while CLP (-0.4% vs. USD), PHP (-0.3% vs. USD), and BRL (-0.3% vs. USD) have underperformed.
PBOC tweaked its process for determining the yuan reference rate. The central bank asked commercial banks to use a shorter period of time (15 hours vs. 24 hours previously) to calculate FX rates when submitting quotes for the daily reference rate. Shortening the period may let the rate better reflect market movements, but we don’t think it means a whole lot, especially since the yuan is still heavily managed.
Singapore is reportedly studying measures to boost revenue, including higher taxes. Lawrence Wong, second minister of finance, said “Medium-term expenditures will continue to rise significantly, be it for infrastructure or for health care reasons. So we are studying revenue. Revenue means taxes.†The government is required to run a balanced budget over its term in office.
