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  • Emerging Markets Debt Daily

    Big Moves in China’s Trade Numbers

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    February 13, 2019

    China’s trade numbers looked more promising in January. Turkey’s industrial production collapse raises the probability of additional fiscal stimulus.

    China’s trade numbers for January drew a lot of attention this morning. The surplus was larger than expected (USD39.16B) with a notable rebound in exports, which jumped up by 9.1% year-on-year. Imports’ contraction slowed sharply to -1.5% year-on-year (albeit not from the U.S.). The overall picture looked more promising than in the previous months. Still, we are mindful of distortions associated with the Chinese New Year, and as such we will wait at least one more month to make our conclusions. On the upside, the trade deal news flow has been more positive lately, including the extension of the March 1st deadline for tariffs on Chinese goods and President Xi Jinping’s expected meeting with the U.S. delegation on Friday.

    Turkey’s industrial production print for December looked disturbing. The decline was close to double-digits (-9.8% year-on-year) and much worse than expected. The collapse helps to explain why Turkey’s current account1 surplus widened in December in seasonally-adjusted terms (so the adjustment mechanism is working as intended). However, there may be growing pressure to put on even more fiscal stimulus in the run up to the local elections, and perhaps more pressure on the central bank to start easing.

    Hungary’s above-consensus Q4 gross domestic product (GDP) print—which comes on the heels of higher core inflation—strongly suggests that the central bank will start its tightening cycle soon. Real growth accelerated to 5% year-on-year, despite the slowdown in Hungary’s main trade partner (Eurozone). The market currently prices in 20bps of hikes in the next three months, and for a good reason.


    1Current account is a record of a country’s transactions with the rest of the world, based on its net trade in goods and services, net earnings on cross-border investments, and net transfer payments.


    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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