If recent examples of revolution and politcal transition are anything to go by, Ukraine is in for a nasty shock in terms of economic growth.
Following a year of upheaval, GDP growth rates can weaken by between 4 to 8 percentage points the following year, according to a Capital Economics note on Thursday. Read more
While the focus in Ukraine has turned to government formation, Russia’s response, and chase-the-president, it’s worth keeping an eye on some of the economic charts.
Here’s a run down. Read more
There are so many scenarios playing out in Ukraine right now, that for most observers it is quite bewildering. Who’s in charge? Will the EU/IMF stump up? What will Russia do?
This flow chart from Nomura may help clarify things. Or perhaps it serves to show just how complicated things are getting. Either way, start from the top and work down. SPOILER ALERT: it seems that all options lead to “political uncertainty”. Read more
If Goodluck Jonathan, Nigeria’s president, showed his ruthless side by removing central bank governor Lamido Sanusi on Thursday, ostensibly for “financial recklessness” (most observers think it was for blowing the whistle on misplaced oil funds), he showed a cannier side by subsequently nominating Godwin Emefiele (left) of Zenith Bank as the new governor.
Emefiele may be unable to do much in the interim about the fall in the naira, but his reputation for prudent financial management may well prove to be an asset. Read more
Credit rating agency Standard & Poor’s raised the spectre of Ukraine not paying back its debt in a downgrade early on Friday. With protesters being killed and the country descending further into chaos, the question is now not whether Ukraine will default, but if it can possibly avoid it. Read more
Nigeria’s president Goodluck Jonathan showed his teeth on Thursday, suspended central bank governor Lamido Sanusi with immediate effect, with his spokesman citing “various acts of financial recklessness and misconduct”.
Sanusi, a well-respected central banker internationally, had clashed with the government in recent days over oil subsidies, exposing huge shortfalls in oil revenues. And while the governor was due to leave office later this year, that’s clearly too long for Jonathan to have a government critic running the central bank. Read more
As the country plunges deeper into crisis, you need a strong heart to bet on Ukraine at the moment.
Here’s what investors are requiring in terms of yield to hold Ukrainian bonds and other assets. Read more
Predicting what the Hungarian central bank is going to do is becoming something of a fools game. Last month, the bank cut rates for the 18th time in a row. So far, so predictable – except the bank changed from 20 basis point cuts (as it had used five times previously) to 15bp.
On Tuesday, the bank cut again – a 19th consecutive cut – but confounded most analysts who had predicted that the weakened currency would give the MPC reason to reduce by a smaller margin. No chance – the bank stuck to its new 15bp reduction, dropping rates from 2.85 per cent to 2.7 per cent. Where will it end? Read more
Who says military rule is bad for stock markets? The EGX30, Egypt’s main stock index, is now over 7,700 – a level not seen since mid-2008.
The index has surpassed the previous post-Lehman high before the removal of president Mubarak, which was just over 7,600 in April 2010. Read more
If the recent recovery in emerging markets has calmed your nerves somewhat, then steel yourself: EM crises are here to stay. That’s according to Joseph Capurso, currency strategist at Commonwealth Bank of Australia.
The good news? EM crises don’t always mean a regional or global recession. In fact, they are rather common, and their impact can be limited. So here are the five facts you need to remember in the next EM crisis (which should be rather soon, in fact). Read more
It’s worth remembering when the markets headlines are all doom and gloom: there’s (almost) always someone winning.
It all depends on your position: short sellers are pretty happy when markets fall. Carry traders may be delighted that a particular currency is tanking. And wild swings in the market may well be music to the ears for any investor in a volatility index. Read more
You’ve heard of the fragile five – well here’s the desperate duo: Argentina, and Ukraine.
Very different circumstances, but both countries are jumping at desperate measures to keep their currencies afloat. But meddling in the FX market doesn’t always work. Read more
Indonesian GDP came in higher than expected in Q4, up 5.7 per cent year-on-year in the quarter, above the average forecast of 5.3 per cent, as improving exports reduced the impact of slowing growth in domestic consumption and investment.
The full FT story is here. Beyondbrics presents a rundown of the analysts’ viewpoints (with our emphasis in bold). Read more
Ouch. This isn’t any old deficit – Brazil has just registered its worst month ever, in terms of trade. Imports outweighed exports by $4.06bn in January, despite a weaker real that should, in theory, be giving a boost to exports.
But how bad is it really? Beyondbrics had a quick dig into the numbers. Read more
Source: HSBC / Markit
The monthly temperature-taking of Asian manufacturing, aka the purchasing managers index, is out for some of Asia’s bigger economies – and at first glance, things look good.
China may have seen its HSBC/Markit (in contrast to the official government) index fall below the 50 mark that separates contraction from expansion, but India, Indonesia and South Korea all look in good shape.
Or do they? Read more
Gill Marcus, governor of the SARB
The basic narrative to South Africa’s rate rise is simple: EM currencies are under pressure, the rand especially; inflation is on the way; so time to hike.
But looking through the South African Reserve Bank’s statement, another concern stands out. Read more
South Africa’s hike in its policy rate on Wednesday failed to impress traders who sold off the rand within 15 minutes of the hike announcement, driving it down by more than 3 per cent to 11.33 to the US dollar.
Speaking after the hike was announced, Ishitaa Sharma, a FX and rates strategist at Citibank said: “The markets are telling central banks they have to be a lot more consistent in their hawkishness.”
In advance of the South African rate hike, the rand had already weakened to 11.17 to the US dollar, a slide of 1.8 per cent. After the announcement, though, the rand fell further. Read more
Big surprise. Despite every economist polled by Bloomberg predicting a hold, the SARB has hiked rates by 50 basis points to 5.5 per cent.
Reserve Bank governor Gill Marcus said that “The primary responsibility of the Bank is to keep inflation under control and ensure that inflation expectations remain well anchored. The depreciation experienced so far could improve our international competitiveness, provided that it is not eroded through higher wage and other input prices.”
For all the talk of differentiation, emerging markets are having a bad Monday. Major currencies, such as the Turkish lira and Indian rupee have been hit; equity and bond markets are falling. As Benoit Anne of Société Générale put it, “global emerging markets are now trading in full-blown panic mode”.
But the recent message to investors from analysts was to look beyond emerging markets as a single asset class. “The real lesson from recent events is that the need for investors to discriminate between individual EMs has never been greater,” said Neil Shearing of Capital Economics. Clearly, the lessons are not being heeded. Read more
Ah, the heady days of the rand at 10 to the dollar. Back only in June last year, that was the big psychological market barrier. Now 11 rand per dollar is the norm. Only a few weeks ago analysts had doubts that it would get that far – in November, Barclays suggested the rand could even strengthen back to 10.
Rip all that up. With the Argentine peso, Turkish lira and Russian rouble all posting big falls in recent days, the rand is just one of several emerging market currencies under pressure. So what are the implications of the rand at 11? Read more