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  • Emerging Markets Debt Daily

    Argentina Trade Surplus Keeps Rising

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    January 23, 2019

    Argentina’s trade surplus keeps rising as imports adjust following last year’s devaluation. South Africa’s inflation moved to the center of the central bank’s target range. Venezuela’s opposition prepares for national protests.

    Argentina’s external adjustment continued unabated in December. The trade surplus rose to USD1.369B, exceeding expectations as imports contracted further following the peso’s large devaluation (see chart below). The positive impact on the currency, however, is likely to be limited (at least for now) as the central bank is buying U.S. dollars when the appreciation pressures push the peso under the trading band’s floor.

    South Africa’s headline inflation moderated to the mid-point of the target range in December (4.5% year-on-year), in line with expectations and with the central bank’s updated (lower) inflation forecast. Underlying price pressures remained subdued (core inflation was unchanged at 4.4% year-on-year in December), and the negative output gap should keep them under control in the coming months. The weaker rand is an obvious risk to this scenario, but the market currently expects the central bank to stay on hold for the rest of 2019.

    Venezuela-watchers will be glued to their screens today, as the opposition and their leader, National Assembly President Juan Guaido, will be holding a national demonstration against President Nicolas Maduro and his regime. The turnout – especially in the poorer areas – would be an important gauge of the opposition’s support. Guiado’s comment that the opposition would seek a renegotiation of Venezuela’s external debt also caught the market’s attention this morning.

    For more on Latin America, please see the latest research note on Brazil by Portfolio Manager Eric Fine: Brazil: Belle of the Ball.


    Chart at a Glance

    Argentina Trade Balance

    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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