Halister News

(Bloomberg) -- Emerging market investors may focus on inflation readings in CEEMA to gauge central banks policies while sustainability of China’s economic recovery will dominate the theme in Asia. Over in Latam, Brazil’s deepening political quagmire continues to hog the region’s limelight.

• MAIN RISKS

• CEEMA
• Deflation risks are strongest in Romania, Poland and Israel, which may mean inflation data across CEEMEA will be closely- watched in months ahead
  • Markets will look for confirmation that recent price downturns in typically-high inflation countries like Turkey, Russia and South Africa, are not one-off events
  • Hungary continues to surprise on monetary policy measures and central bank meeting on May 24 must be watched
• Commodity exporters like Russia and South Africa saw sharp gains in their currencies after the recent commodities rally, which may leave them vulnerable to corrections if commodity rally retrenches

• LATAM
• Latam FX remains tied to commodities and broad USD moves linked to investor’s stance on Fed’s next steps
• Argentina may lift final FX controls, bringing more liquidity to the market
• BCB continues as most significant BRL player; bank bought ~$1.63b in FX reverse swaps after BRL closed beyond 3.50, reinforcing view that level serves as trigger for FX intervention
• Brazil Senate likely to accept President Rousseff’s impeachment process on May 11-13, which will force her to step down from post and await trial
  • Major newspapers report that over 50 senators already said to vote in favor of Rousseff’s ousting, a good margin from the 41 required
  • Cloudy political skies begin to clear as VP Temer in talks with potential members of his future cabinet and Valor reports he can count on support of 400 lawmakers and 60 senators to pass initial measures
    • Confirmation of mkt friendly names for FinMin and BCB president positions is key for continued BRL appreciation

• ASIA
• China’s economy may benefit as yuan weakens faster over a broader measure than it is rising versus dollar; click here for chart of CFETS index against USD/CNY
  • April manufacturing PMI remained above 50.0, suggesting China growth is getting traction; could mean a delay to rate cuts
• Possibility of monetary easing in Malaysia may increase with the appointment of Muhammad Ibrahim as central bank governor successor to Zeti
  • If inflation continues to fall below expectations, it may compel BNM to cut overnight policy rate, analysts at DBS wrote on April 28; next CPI data due May 18 while BNM holds policy meeting following day

• CALENDAR (based on local dates)
• May 3: South Korea CPI; Turkey CPI and PPI
• May 5: Brazil minutes; Mexico rate decision; Colombia CPI; Chile IMACEC
• May 6: Malaysia trade balance and FX reserves; Brazil CPI; Chile CPI
• May 7: China foreign reserves
• May 8: China trade balance
• May 9: Taiwan exports; Mexico CPI
• May 10: China CPI; Turkey C/A balance; Hungary CPI
• May 11: Thailand central bank meeting
• May 12: India IP; Philippines central bank meeting
• May 13: Malaysia 1Q GDP; Bank of Korea meeting; Poland core CPI
• May 14: China IP; Singapore non-oil exports
• May 16: Thailand 1Q GDP
• May 17: Chile rate decision
• May 18: Malaysia CPI; South Africa CPI
• May 19: Malaysia and Indonesia central bank meetings; Singapore 1Q GDP final; Philippines 1Q GDP; Mexico minutes; South Africa rate decision
• May 20: Malaysia FX reserves; Mexico GDP
• May 23: Singapore CPI
• May 24: Thailand customs exports; Turkey central bank meeting; Hungary central bank meeting
• May 27: Taiwan 1Q GDP final; Colombia rate decision
• May 31: India 1Q GDP; Brazil Fiscal Data; Poland CPI

• NOTE: Mark Cudmore, Davison Santana and Mark Cranfield are strategists who write for Bloomberg. The observations they make are their own and are not intended as investment advice.