Skip directly to Accessibility Notice
  • Emerging Markets Debt Daily

    South Africa New Cabinet Did Not Disappoint

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    May 30, 2019

    The market was comfortable with South Africa’s new cabinet lineup. Brazil’s growth remains underwhelming.

    The market reacted favorably to South Africa’s new cabinet lineup. The fact that market-friendly Pravin Gordhan and Tito Mboweni retained their respective positions as Minister of Public Enterprises and Minister of Finance was one of the reasons. The market also appreciated the reduction in the number of ministries to 28. The appointment of an opposition leader Patricia De Lille Minister of Public Works and Infrastructure provided an interesting twist that might signal broader political inclusion. The market was understandably concerned by the presence of David Mabuza (Deputy President) and Gwede Mantashe (Minister of Energy), explaining this by the need to balance political interests within the African National Congress (ANC). Another concern was sparked by suggestions that Mboweni might not stay for the full term. The next important milestone is the State of the Nation Address later in June, which is expected to provide more clarity on the new government’s reform agenda.

    Today’s Q1 real gross domestic product (GDP) print in Brazil confirmed that the economy contracted (by 0.2% quarter-on-quarter) for the first time since the last recession. With the cumulative growth for the last four quarters below 1%, there is little pressure on the central bank to tighten its policy stance. However, the need to speed up structural changes that can boost the country’s growth potential is getting more and more pressing.

    Mexico’s Q1 inflation report gave the market some food for thought due to its stagflationary undertones. The growth outlook was cut with the balance of risks still to the downside due to domestic and external uncertainties. The inflation projections, however, were revised higher reflecting the central bank’s concerns about sticky core prices. Even though the central bank described some inflation pressures as transitory, the report supports the board’s hawkish policy bias, arguing against near-term policy rate cuts.


    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.

    The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned herein. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Certain information may be provided by third-party sources and, although believed to be reliable, it has not been independently verified and its accuracy or completeness cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as the date of this communication and are subject to change.

    Investing in international markets carries risks such as currency fluctuation, regulatory risks, economic and political instability. Emerging markets involve heightened risks related to the same factors as well as increased volatility, lower trading volume, and less liquidity. Emerging markets can have greater custodial and operational risks, and less developed legal and accounting systems than developed markets.

    All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.