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  • Emerging Markets Debt Daily

    China’s Identity Search

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    January 10, 2020
     

    First, I want to honor my promise to report on the China conference that I attended yesterday. I posted my first reaction on Twitter (@NGurushina), where I naturally mentioned the Phase One deal (a nice safety net, but mostly priced in). But the more I think about it, the more it seems to me that we should be focusing on China’s structural shifts, the fact that China is still deciding what kind of country it wants to be, how it wants to fit into the global system, and what elements of statism (a political system with substantial centralized state control) it wants to preserve. The rise of nationalism and the role of the communist party also featured prominently in yesterday’s discussions. By the way, talking about Twitter, the VanEck community there is growing. The one and only Portfolio Manager David Schassler (@schassler) joined yesterday with a couple of cool charts and a hilarious welcoming “econometric model” meme from our colleague @gaborgurbacs. Intrigued? Pay us a visit (@vaneck_us, @JanvanEck3, @thatEdLopez, and more). 

    Mexico’s ongoing industrial production decline probably deserves a mention, but it is just not fun to repeat the same thing again and again. So, let’s focus on Brazil instead. December’s inflation jump looked a bit frightening (from 3.27% year-on-year to 4.31%), but in fact it was narrow-based (food, some regulated prices). Further, headline inflation ended the year just slightly above the mid-target of 4.25% and the core inflation dynamics continue to look benign. So, while the recent data releases support the consensus view that the current rate-cutting cycle is over, there are no reasons to suggest a more hawkish policy turn

    Indonesia’s central bank (BI) comment that it might allow further currency appreciation was well-received in the region. BI noted that this decision reflects the improving current account outlook and will be conditional upon keeping volatility at “manageable” levels. The move might also signal that authorities have more confidence about the growth outlook. Finally, persistent currency strength can encourage locals to step up repatriations, creating a positive feedback loop
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    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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