Emerging Markets

In Venezuela, the economic situation is near collapse: the lack of basic necessities has become so serious that in recent days there have been several outbreaks of violence, starting from the state of Cabobo, where some demonstrators blocked for hours and for second consecutive day, the highway accesses that connects Valencia to Puerto Cabello to ask, first of all, that the national government to restore the drinking water supplies. Only the intervention of the National Guard allowed to remove roadblocks.

For most investors, Pakistan is not an investment destination being considered in their investment process. But soon MSCI, the biggest index provider globally, may bring that to a sudden change. On June 14th, MSCI will announce its decision whether to upgrade Pakistan from the current frontier market classification to emerging market classification or not. In the case of a positive decision, emerging markets funds with an estimated 40x the capital of frontier funds will be forced to have a look at the 180 million population nation on the border between Asia and the Middle East.

Argentina is still in recession, despite the great strides made by the new government Macri to reactivate growth. According to Moody’s, GDP will contract by 1.5% this year, given the ongoing growth of unemployment and inflation that remains above 30%.

The agency provides that in Buenos Aires the new policy will not begin to have an effect before next year. The Moody’s report comes as a result of Argentina’s return on the capital market, after an absence of 15 years.

Iraq is carrying out the project to issue government bonds worth 2 billion dollars in the next three months, focusing on international aid that will lower the costs of borrowing, said Ali al-Alak, governor of the Iraqi Central Bank, in an interview yesterday in Baghdad reported by Reuters.
Iraq – said the governor – hopes that the yield decreases to 5% from 11% initially requested by investors. There is in fact a precedent that had scuppered a similar attempt: October 2015 Baghdad had canceled a dollar bond issue Americans for not paying a yield of 11 percent. This time the operation – which should be handled by some banks including Standard Chartered, Deutsche Bank and Citi – would result in a plan devised in December 2015, cost cutting should be possible thanks to successes against the Islamic State and the ‘aid to central Bank and international Monetary Fund. A 5% return which would have even less than that paid by Greece for its bonds (ranging 9-12%).

China continues to dominate discussions of the Asia-Pacific (and, at times, global) economic and financial landscape. But the story has changed. Markets have now shifted their focus to the Chinese currency markets, with the macroeconomic story relegated to a secondary plot.

Morgan Stanley analysts said several factors should support relative WTI strength in 2Q16. Spot WTI-Brent increased from more than -$3.50/bbl to near parity in recent days. “Heading into 2Q, we […]

The jump in gold ETF holdings during early 2016 has been widely publicised, with the ytd total over 260t, or 18%, higher compared with end-2015 levels. Retail buying of coins and bars has also improved, but less dramatically. Below, we draw on our latest field research, highlighting key trends, for both gold and silver, in particular the strength of consumer price expectations and what this may suggest for retail demand over the rest of 2016.

Moody’s lowered the outlook on China’s credit rating from stable to negative, citing a weakening of fiscal metrics and a continuing fall in foreign exchange reserves. The rating agency also noted uncertainty over the capacity of authorities to implement the reforms needed to address imbalances in the world’s second-largest economy