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  • Emerging Markets Debt Daily

    India’s Structural Issues Bite Back

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    November 08, 2019
     

    Moody’s lowered India’s outlook to negative, citing several structural issues. China’s trade numbers improved in October.

    Moody’s is behind the curve yet again—changing India’s outlook to negative, but keeping the rating higher than the other two agencies. Moody’s gave a bunch of reasons, none of which was a revelation (growth risks, rising debt burden, fiscal trajectory). Even though Moody’s decision was “half-baked” (in our opinion), it nevertheless refocused the market’s attention on major structural challenges, many of which remain “unattended” for years, and away from political euphoria related to Prime Minister Narendra Modi’s election triumph. We hope the government starts paying more attention as well.

    China’s foreign trade numbers improved in October, with both nominal exports and imports contracting less than expected. On our part, we like to track a 3-month moving average in imports (which is less volatile), and it looks like the gradual rebound trend remained intact (a good sign as regards domestic demand). The U.S.-China headlines continue to generate a lot of noise, but if the existing tariffs are indeed rolled back, this will send a strong pro-growth signal, with Chinese exports being a key beneficiary.

    With the presidential elections behind us, Argentina spends less time in the headlines. However, there are a lot of developments in the background—some of them are actually quite encouraging. We particularly like the fact that new capital controls are working and that the central bank is now buying U.S. dollars (the latest purchase of USD200M was yesterday). So, the international reserves are no longer declining, and this puts the country on a firmer footing as it prepares to engage in discussions with debt holders.

    À propos: I am not in the office this morning (meeting with officials from beautiful Iceland), so I decided to update you on my first week in Twitterland instead of creating yet another smart chart. It is actually more fun than I expected (I hope Compliance is busy with something else), and my VanEck colleagues have been super-supportive. One (non-VanEck) dude wrote “Welcome! And sorry in advance”, but then quickly added that this is Twitter sense of humor (thanks G, because I already started to plot my revenge). I’ve got 69 followers (yay!), and a few likes and retweets. I am even sharing recipes successfully...pickling green tomatoes with black currant leaves. Please, come to visit us in Twitterland—both VanEck (@vaneck_us) and yours truly (@NGurushina).

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