Emerging Markets: The Week Ahead

(from my colleague Dr. Win Thin)

India reports March WPI and CPI on Tuesday.  The former is expected to rise 5.3% y/y vs. 4.7% in February, while the latter is expected to rise 8.24% vs. 8.10% in February.  Inflation had been trending down, allowing the RBI to remain on hold for the time being.  After aggressive RBI tightening last year, INR yields are in the 9% area.  With low interest rates seen across most DM and EM countries, this is enough to attract investor interest.  Investors are also optimistic about the BJP-led government, though we warn of a potential “buy the rumor, sell the fact” when results are announce May 16.

Poland reports March CPI on Tuesday and is expected to remain steady at 0.7% y/y.  It follows up with core CPI on Wednesday, expected to remain steady at 0.9% y/y, and then March IP on Thursday, expected to rise 6.3% y/y.  The central bank will release minutes of its most recent meeting on Thursday too.  At that meeting, it kept rates steady at 2.5%, as expected.  It also kept its forward guidance in place, saying rates would be kept steady until at least end-Q3.  However, Governor Belka said that forward guidance could be modified in July.

Brazil reports February retail sales on Tuesday.  However, we think inflation numbers are the most important data for Brazil right now. Second April preview for IGP-M comes out on Wednesday, followed by mid-April IPCA inflation on Thursday.  IPCA inflation for March was a tad higher than expected, with the y/y rate coming in at 6.15% vs. 6.08% consensus and 5.68% in February.  Next COPOM meeting is May 28.  By then, we will have seen second May preview for IGP-M (May 19), mid-May IPCA (May 21), and April PPI (May 28).  If readings remain elevated, think COPOM will have to respond with another 25 bp hike then.

China reports March retail sales, IP, Q1 GDP on Wednesday.  Sales seen rising 12.2% y/y while IP seen rising 9.0%.  Q1 GDP is seen rising 7.3% y/y vs. 7.7% in Q4.  The IMF sees China growth at 7.5% this year, unchanged from the last update in January.  Given what we've seen in China in Q1, we are very surprised that the IMF didn't mark it down like it did for Russia, South Africa, and Brazil.  IMF sees 7.3% growth in China for 2015, also unchanged from January.  This too is probably a tad too optimistic view by the IMF.

South Africa reports February retail sales on Wednesday.  The real sector data have shown some improvement lately, but we do not think by enough to warrant the more hawkish SARB stance in recent weeks.  Governor Marcus warned recently that accommodative rates “can’t last” and echoes comments she made at the last SARB meeting, when 3 voted to hike rates.  Next SARB meeting is May 22.  We do not think a hike then is likely, as the performance of the economy remains lackluster by any standards.

Chile central bank meets Thursday and is expected to keep rates steady at 4.0%.  Chile reported higher than expected March CPI at 3.4% y/y vs. 3.3% consensus and 3.2% in February.  This keeps it in the upper half of the 2-4% target range.  The bank has signaled a slower pace of easing, and so everything seems to be lining up for steady rate this month.  Further easing is possible later in the year, but the pace will be slower.

Emerging Markets: The Week Ahead Emerging Markets:  The Week Ahead Reviewed by Marc Chandler on April 14, 2014 Rating: 5
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