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  • Emerging Markets Debt Daily

    Argentina-IMF: Tangled Up or Tango On?

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    September 25, 2019

    The future of the International Monetary Fund’s (IMF’s) next disbursement to Argentina (USD5.4B) remains uncertain, as the government is preparing to meet with the fund again later today. The official line seems to be that Argentina can manage without the tranche until a new program is agreed, after the presidential elections in one month. Yesterday’s statement from the IMF points to similar timing. The language was measured – perhaps too measured – noting only that the meeting was constructive, that authorities managed to calm the markets and that the talks will continue. Portfolio Manager Eric Fine summarized the situation well with his “kicking the can” analogy.

    South Africa’s leading indicator continues to look more dead than alive. There was a small uptick in July, but the index remained well below 2018 highs, with no signs of improvement (see chart below). There are plenty of local headwinds to growth. Most of them are structural – such as the government’s inability to fix the state-run utility Eskom. Europe’s growth malaise, however, poses additional risks, as the region accounts for about 25% of South Africa’s exports.

    Thailand’s central bank (BoT) is back in contemplation mode – downgrading its growth and inflation forecasts but keeping the policy rate on hold at 1.5%. The BoT still expects some growth pickup next year, and feels that the August rate cut provided sufficient stimulus for now. The market does not price in additional easing this year, but it is important to keep an eye on the currency – “excessive” appreciation may force the BoT to act sooner rather than later due to concerns about competitiveness and impact on exports.  

    Chart at a Glance:
    South Africa’s Leading Indicator – No Sign of Breakthrough

    Source: Bloomberg LP


    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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