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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).


    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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