EM Preview for the Week of January 28, 2024

January 28, 2024

EM FX was mixed last week as the dollar put in a mixed performance against the majors. ZAR, TWD, and BRL outperformed while HUF, PEN, and CLP underperformed. Developments in the U.S. this week will determine the near-term outlook for EM. We expect the Fed to keep rates steady but push back against imminent easing, while the jobs data should support our view that the economy remains robust. This should help the dollar gain.

AMERICAS

Brazil reports December central government budget data Monday. A primary deficit of -BRL117.6 bln vs. -BRL39.4 bln in November. COPOM meets Wednesday and is expected to cut rates 50 bp to 11.25%. Mid-January IPCA inflation fell to 4.47% y/y, the lowest since mid-August and further within the 1.75-4.75% target range. December IP will be reported Friday and is expected at -0.3% y/y vs. 1.3% in November.

Mexico reports Q4 GDP data Tuesday. Growth is expected at 0.4% q/q vs. 1.1% in Q3, while the y/y rate is expected at 3.0% vs. 3.3% in Q3. If so, it would be the slowest y/y growth since Q4 2021. Banco de Mexico will come under pressure to start the easing cycle, but inflation picked up in mid-January and remains elevated. Next policy meeting is February 8, and no change is expected then. However, the March 21 meeting is in play if inflation falls in the coming weeks.

Chile reports December IP and retail sales Wednesday. Manufacturing production is expected at 1.7% y/y vs. 4.5% in November, while sales are expected at -2.2% y/y vs. -2.4% in November. The central bank meets later that day and is expected to cut rates 100 bp to 7.25%. However, a handful of analysts look for a smaller 75 bp cut. December GDP proxy will be reported Thursday and is expected at 0.7% y/y vs. 1.2% in November.

Colombia central bank meets Wednesday and is expected to cut rates 50 bp to 12.5%. However, the market is split nearly 50-50 between 25 and 50 bp cuts, with one analyst looking for a 75 bp cut. At the last meeting December 19, the bank started the easing cycle with a 25 bp cut to 13.0%. The vote was 5-2, with the dissents in favor of steady rates. Given those cautious dissents, we lean towards a 25 bp hike this week.

Peru reports January CPI Thursday. Headline is expected at 3.18% y/y vs. 3.24% in December. If so, inflation would be the lowest since May 2021 and nearing the 1-3% target range. With inflation falling steadily, the bank continues to cut rates at 25 bp clips. Next meeting is February 8 and another 25 bp cut to 6.25% is likely.

EUROPE/MIDDLE EAST/AFRICA

National Bank of Hungary meets Tuesday and is expected to cut rates 100 bp to 9.75%. If so, the pace would pick up from 75 bp the past several meetings. The bank has room to ease in order to support the modest recovery in domestic economic activity. Inflation in Hungary continues to decelerate broadly, falling to 5.5% y/y in December from a high of over 25% y/y last January. The bank forecasts strong disinflation to continue in early 2024. As such real rates will likely remain positive and in favor of a firm HUF. December PPI will be reported Wednesday.

ASIA

Korea reports December IP Wednesday. IP is expected at 4.3% y/y vs. 5.3% in November. January trade data will be reported Thursday. Exports are expected at 18.4% y/y vs. 5.0% in December, while imports are expected at -9.2% y/y vs. -10.8% in December. January CPI will be reported Friday. Headline is expected at 2.9% y/y vs. 3.2% in December, while core is expected at 2.7% y/y vs. 2.8% in December. If so, headline would be the lowest since July but still above the 2% target. The next Bank of Korea meeting is February 22, and no change is expected then.

China reports official January PMIs Wednesday. Manufacturing is expected at 49.2 vs. 49.0 in December, while non-manufacturing is expected at 50.6 vs. 50.4 in December. If so, the composite would likely rise a couple of ticks from 50.3 in December. Caixin reports preliminary January manufacturing PMI Thursday and is expected to rise a tick to 50.9. While recent PMI readings suggest the economy is stabilizing, we do not expect a robust recovery in 2024. Meanwhile, policymakers continue to support the equity market, this time by halting securities lending of certain shares for short selling.

Indonesia reports January CPI Thursday. Headline is expected at 2.55% y/y vs. 2.61% in December, while core is expected to remain steady at 1.80% y/y. If so, headline would fall for the second straight month and remain well within the 2-4% target range. However, Bank Indonesia remains concerned about rupiah weakness and cannot afford to cut rates anytime soon. Next policy meeting is February 21 and rates are expected to be kept steady at 6.0%.

More from Mind on the Markets

  • ""

    The Duck Test

    Read More
  • ""

    Drivers for the Week of April 28, 2024

    Read More
  • ""

    EM Preview for the Week of April 28, 2024

    Read More
SHOW ALL

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2023. All rights reserved..

As of June 15, 2022 Internet Explorer 11 is not supported by BBH.com.

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

 
1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see bbhluxembourgfunds.com


captcha image ↻

Type in the word seen on the picture

I am a current investor in another jurisdiction

1 of 2

2 of 2