However, the macroeconomic environment is different this time, with the US dollar at a year high, weighing on the majority of emerging markets currencies. Investors should also expect heightened volatility through the rest of the year with the Brazilian presidential elections and Chinese national congress set to take place in October.
Given recent news, however, investors may now have to wait. India is the largest bond market in the emerging world that is not included in the local currency emerging markets debt index. Compared to Hong Kong, longer lead times in launching an IPO in mainland China have insulated its deal pipeline from market volatility. Additionally, larger homecoming deals have migrated to the mainland rather than Hong Kong in recent years.
However, Chinese IPOs in the US market have dried up, particularly since the second half of —much to the benefit of both the Hong Kong and mainland markets. These markets are likely to play dominant roles for the equity fundraising needs of Chinese companies going forward, while the role of the US equity market could dwindle. The Federal Reserve was the main event, delivering a basis-point bp rate hike, but there were a number of other important policy meetings.
In developed markets, the central banks of England, Japan, Sweden, Switzerland, and Norway all held meetings, while some of the notable meetings in emerging markets included Indonesia, Brazil, Turkey, the Philippines, and South Africa.
Indonesia was particularly aggressive, going with a bp hike and signaling that a more frontloaded adjustment is warranted. Brazil paused and may now be finished with its hiking cycle, which has been one of the most aggressive in the world. Since last March, Brazil embarked on a string of 12 consecutive hikes that took its policy rate The market reaction was muted, most likely because few foreign investors remain in the domestic bond market.
The Philippines hiked rates by 50 bps to 4. Finally, South Africa hiked rates by 75 bps to bring its policy rate to 6. The decision comes as demand for housing in China hovers near all-time lows following a series of loan defaults, weak economic data, and falling consumer confidence. The spin-off listing should help gauge investor sentiment for real estate-related listings, which are vital to the health of the Chinese economy as they represent nearly one-third of economic output.
While sentiment has crumbled, Chinese authorities have ramped up support for the sector, recently cutting bank deposit rates for the first time since to boost growth. Ghana Set to Restructure Local Debt Ghana is reportedly poised to begin negotiations with local currency bond holders as part of a debt sustainability plan that is needed to secure a loan from the International Monetary Fund IMF.
Ghana, which has suffered from a high and deteriorating fiscal deficit, began engaging with the IMF in July after it lost access to capital markets, a key source of its funding, and as its foreign reserves dwindled to concerning levels.
The country's long-term issuer default rating has now reportedly been lowered to CC. The change in the relationship between these assets is primarily due to monetary policy divergence. Authorities in China have eased policy as the economic outlook for China has become more fragile due to ongoing COVID lockdowns and slowing export growth.
Meanwhile, the latest US inflation data surprised to the upside, causing market participants to expect large Federal Reserve rate hikes. Vedanta and Foxconn hope to open the facility by and have it reach full capacity over the first 6—12 months.
The bill, which is expected to reshape relations with Taiwan and deter any attacks by China, would formally designate Taiwan as a major non-NATO ally, as well as force the United States to impose sanctions on big Chinese financial firms in response to any hostile actions in or against Taiwan. The bill still requires a vote in the full Senate and House of Representatives after passing the Senate Foreign Relations Committee, and it is possible that lawmakers will include it within broader legislation such as the National Defense Authorization Act as well.
The governments of the European Union EU are in the process of formalizing its plans and are expected to make a final decision within three months, with a qualified majority of member states required for the proposal to take effect. Hungary is the first country to be subjected to a probe under new rules allowing the EU to penalize any members that undermine its financial interests.
The commission has spent several months investigating the rule of law since Prime Minister Viktor Orban took office in While Hungary is unlikely to lose access to the full amount, the headlines indicate a broad-based sell-off with the forint weakening, local yields rising, and credit spreads widening. Many investors have already started to convert their Chinese ADRs to Hong Kong shares as well, which has resulted in a gradual shift of the market capitalization breakdown of Chinese equities to be more A-share, or mainland-listed, and Hong Kong-focused.
We expect to see more of these "homecoming" listings over the coming year. Meanwhile, Chinese initial public offerings in the US market have dried up, particularly since the second half of and through the first half of this year. Amid escalating US-China tension, the mainland A-share and the Hong Kong equity markets are likely to play dominant roles for the equity fundraising needs of Chinese companies going forward, while the role of the US equity market could dwindle.
Russian state-owned oil and gas company Gazprom claimed the suspension was due to a technical fault in the main gas turbine at the Portovaya compressor station near St. Petersburg, which feeds the line that runs through the Baltic Sea into Germany. A cabinet reshuffle has already begun, with President Boric firing his interior minister and removing one of his chief advisors.
With a weakened government, ambitious tax reform and social spending proposals are likely to get watered down, which should reduce fiscal pressure and help reduce inflationary pressures. However, political uncertainty will remain elevated as Chile is now back to square one in the constitutional reform process. Inflation is likely to continue to rise amid the recent rate cuts, higher energy costs, and unanchored inflation expectations. Aside from Turkey, which is a unique case, perhaps some of the most concerning figures came from Colombia, where inflation rose more than expected and hit a year high.
The headline annual inflation rate rose to Week Of 05 September Chart of the Week Brazilian Equities to Remain Volatile as Election Approaches With just a month until the first round of presidential elections in Brazil, we look back at how equity markets have fared during election years and months in the country. While every election is unique, the MSCI Brazil Index has tended to outperform during election years, and especially during the election month of October, moving higher and outperforming emerging markets and developed markets equities in four of the last five elections.
Recent economic releases—including a decline in unemployment to under 10 million people for the first time since and higher-than-expected growth of 1. The Chilean government intends to treat the arrangement as precautionary as it faces challenging external pressures due to a wide current account deficit and financial account pressures. The FCL should help replenish foreign exchange liquidity and allow Chile to avoid external debt issuance ahead of the upcoming constitutional reform referendum in early September.
While the new IMF arrangement is not a panacea to the potential political crisis, it should serve as an important backstop to help boost market confidence during a period of heightened risk. It is at this event, typically held once every five years, that President Xi Jinping is expected to officially secure an unprecedented third five-year term.
However, it is unlikely that President Xi will announce a potential successor at the congress. Thus far, no apparent political heir has emerged, which is likely by design, as it allows Xi to preserve his influence for years to come.
Big Hike in Hungary The National Bank of Hungary NBH made another aggressive hike with a bp increase in its base rate, and matched the move in the weekly deposit rate. The base rate now stands at These two factors will be the key determinants of the end of the tightening cycle, according to the NBH. In contrast, regional peers in Czech Republic and Poland reiterated this week their plan to stop or slow rate hikes as the energy crisis in Europe is expected to stifle growth.
The NBH also announced a set of measures to substantially cut excess liquidity of the forint and help support the currency. Many emerging markets central banks have been proactively tightening monetary policy since early , contributing to multi-year highs in local rates. As a general rule, local yield curves tend to peak when the terminal rate has been reached. We believe several large emerging markets countries comprising nearly half of the local debt investment universe—Brazil, Chile, Czech Republic, Colombia, Hungary, Mexico, Peru, and Poland—will likely reach terminal rates by the end of As a result, we expect to see an increasing number of attractive opportunities to add local duration exposure in emerging markets local markets in the coming months.
The news comes amid an ongoing saga between regulators, which has led to great uncertainty over the future of more than US-listed Chinese companies and even the potential delisting of some Chinese stocks. Per the new agreement, China has agreed to allow the Public Company Accounting Oversight Board inspectors to access audit work papers and personnel of US-listed companies, with the first audits expected to occur as early as mid-September. The latest efforts harken back to the days of investment-driven growth and economic stimulus during the global financial crisis.
Policy leaders are trying to walk an economic tightrope—unveiling government stimulus and looser monetary policy to moderate slowing growth, while avoiding taking on much more debt. These measures are likely to put pressure on the Egyptian pound in the near term, but should contribute to progress toward exchange rate flexibility, consistent with International Monetary Fund IMF guidance.
Bank Indonesia Surprises with a Hike Bank Indonesia BI raised its key policy rate by 25 basis points, one month earlier than consensus expectations. Current Governor of Bank Indonesia Perry Warjiyo talked down the pressure to hike rates just days earlier and the statement continued to send mixed signals. Given that the central bank meets monthly, we expect these hikes to be gradual. Nearly all asset classes suffered significant losses through the first several months of , but the underperformance across emerging markets assets was particularly acute due to a toxic combination of high inflation, slowing growth, monetary tightening, and the war in Ukraine.
Over the past month, however, emerging markets assets have enjoyed a bounce thanks to an improvement in risk appetite on signs that inflation may have peaked and reduced expectations of Fed tightening. The key question is whether this rebound is sustainable. To a large extent, much will depend on whether the Fed is able to engineer a soft landing in the United States. We believe it is still premature to declare victory in the war on inflation or rule out the possibility of recession.
That said, emerging markets valuations remain historically reasonably priced, and we see select opportunities for attractive risk-adjusted returns in certain parts of the asset class. What Happened Last Week The news behind the headlines: our perspective on key events in EM Beijing Aims to Support Property Sector as Public Grows Weary In an effort to shore up economic growth, reports surfaced that the Chinese government may order state-run companies to guarantee some renminbi-denominated debt issued by troubled real estate developers.
As the government has focused on reducing excess leverage in the economy, investors questioned whether cash-strapped developers would be able to deliver on pre-sold homes amid a liquidity crunch. Policy leaders have eased lending requirements and have lowered interest rates in a bid to support the struggling industry. Recently, in an act of public defiance across more than Chinese cities, hundreds of thousands of homeowners have refused to make mortgage payments on pre-sold homes.
In July, regulators issued another round of fines on Tencent as well as a range of other firms for failing to comply with anti-monopoly transaction disclosure laws. The Meituan divestment marks the third-major sale in for Tencent, which has already exited large stakes in e-commerce companies JD.
The reshuffle at the central bank is likely to bring important changes and may be a prelude to a shift in monetary policy. For example, further currency depreciation and more aggressive rate hikes could more closely align Egypt with the International Monetary Fund.
The lira weakened to near all-time lows versus the US dollar following the announcement. Instead of raising rates to fight inflation like nearly all other central banks across the globe, the CBRT has opted to experiment with macroprudential measures to slow loan growth and interventions to protect domestic savers from lira weakness. Term premiums have collapsed across emerging markets over the past few months and yield curves are inverted in a number of countries, including Brazil, Chile, the Czech Republic, Hungary, Mexico, Poland, and Turkey.
A weakening outlook for economic growth has helped hold down long-term rates while short-term rates have risen as central banks continue to hike. Tightening cycles in emerging markets are more advanced than in developed markets, and as such, the outlook for local rates is turning more positive. For example, with its rate hike last week, Banco Central do Brasil has now raised rates a total of Brazil is now likely nearing the end of its tightening cycle and may soon shift focus to stimulating growth.
In short, the outlook for local rates is improving in parts of Latin America and Europe, where we expect to see peak inflation in the coming months, the policy cycle is more advanced, and policy rates are at or close to the terminal rate. On the other hand, the local rate outlook is more mixed across Asia, where central banks are generally earlier in the cycle and are not near the end, despite easing commodity prices. While the exercises may have ceased for now, we could expect an increase in cross-strait tensions and further strain on US-China relations.
Foreign shows of support for Taiwan will likely bring stronger military responses than in the past. And although China is unlikely to regularly conduct missile tests near Taiwan, or routinely close nearby waters to commercial traffic, such actions will become less unusual. The jump in prices was primarily driven by a surge in pork and vegetable prices, which advanced Overall food prices posted a fourth-straight month of gains and made their largest move since September , jumping 6.
While prices were expected to rise across the board, weak consumer demand because of sporadic lockdowns around China kept them in check. The 2. Bond prices remain deeply distressed at around 20 cents on the dollar. Reluctant Liftoff in Thailand The Bank of Thailand BOT raised the benchmark policy rate for the first time since , and signaled a steady, measured approach to future hikes.
Consistent with its guidance over the past few months, the BOT raised the one-day repurchase rate by 25 basis points to 0. We expect the BOT to take a data-dependent approach going forward, although US Fed tightening and recent weakness in the baht may add pressure to hike.
Inflation Tumbles in Brazil Recent tax cuts on fuel and electricity helped prices fall by 0. This better news underpinned the modest deceleration in underlying inflation, even if services remain resilient. In these previous cycles, the corresponding emerging markets equity price recorded either a similar, or a smaller, decline than the forward EPS decline. The equity price decline in the current downgrade cycle has already exceeded the median decline, creating a buffer for additional downgrades.
The bill specifies that semiconductor producers accepting American subsidies would not be able to expand advanced defined as circuits smaller than 28 nanometers chip manufacturing in China for 10 years. Samsung Electronics and SK Hynix, both leading Korean chipmakers, are re-evaluating their investments in China and leaning toward new plans for the United States. Samsung and Intel are also in the early stages of building semiconductor plants in the United States.
Should the global downturn deepen, this would further hit export revenues for the net-exporting region. Meanwhile, as China contends with ongoing property sector troubles and stays with zero-COVID tolerance, we have lowered our growth forecast for the country to 2. For Asia-Pacific, expected growth falls to 3. Input prices and financing costs to hit- Input prices remain elevated, while cost pass through stays weak given subdued consumption and demand.
This could further erode the already-thin profit margins of the region's corporates. China and Japan are keeping interest rates low, while most Asia-Pacific central banks are seeking to match the Fed's rate hikes. Investors could turn more selective and seek higher spreads. Lower-rated issuers will feel the pain most acutely. However, a deteriorating macro situation, high input prices and borrowing costs pose significant downside for rated corporates and could spike loan loss provisions for banks.
Local and regional governments LRGs will also feel the heat from price shocks and rate hikes. Structured finance markets are exposed to possible worsening of household balance sheets as higher prices bite. Peaks in our CCIs tend to precede periods of negative credit developments by six to 10 quarters. We see potential for higher credit stress in late and early , and beyond. Patrick Drury Byrne, Ireland, 1 , patrick. Economics But the weekly Bloomberg Nanos Canadian Confidence Index has remained in net negative territory since June 17, and consumer pessimism is now a flip of the coin Small business sentiment remains subdued while manufacturing new orders, a leading indicator of economic activity, are in contraction territory.
However, gas prices remain high relative to pre-pandemic averages. This reflects relative--and expected--policy and market rate paths and heightened risk aversion; we appear to be entering the third dollar boom period in the past 50 years. This surge poses several problems for both advanced and emerging economies, including higher imported inflation and the potential for higher rates, capital flow volatility, and higher debt service on U.
There is no easy solution: passivity endangers inflation targets and credibility, rate rises risk lower output and employment, intervention is likely to burn through precious reserves. And the s solution--global coordination--requires a lot of political capital. As central banks aggressively raise rates to fight inflation, our confidence is waning that they can avoid generating a sharp downturn; indeed, we are now expecting a mild recession in the U.
The key variable is labor market performance, which has so far remained robust. We have generally lowered our forecasts for GDP growth in and and raised our forecasts for inflation; the risks around this baseline remain on the downside. Prospects for a near-term recovery are unclear; while the U. Economic Outlook U. Q4 Under The Pump , Oct. We expect the Bank of England to respond to inflation challenges by raising policy rates to 3. Our forecast is subject to significant downside risks stemming from uncertainty related to Russian-Ukraine developments and, in particular, from volatility in the U.
While the private sector is still in relatively healthy territory, the speed in which it reached its historic mean is worrisome. With the Federal Reserve frontloading its aggressive monetary policy into this year and our expectation for a recession next year, conditions are pointing to rising financial fragility in Environmental, social and governance Although they support the industry's preparedness, these regulatory exercises are being done at different paces and levels of detail.
At the same time, banks face methodological challenges and data availability issues that continue to hinder progress in assessing their vulnerability to climate-related risks. Another hurdle for banks is navigating the numerous recommendations and standards to disclose climate risks, with different approaches to identifying issues to report on, and some still under development.
The real step-change would be globally agreed analytical approaches and disclosure standards to enable banks, regulators, and investors to assess climate-related risks more consistently. Argentina banks have already begun adjusting their financial statements for inflation while Turkish banks have yet to do so.
We have factored in the impact of distortions from very high inflation into our assessment of the banking industry's economic risk for both these jurisdictions, as well as into the stand-alone credit profiles of rated entities. Loss-absorbing instruments still have a key role to play in Asia-Pacific banking to buffer senior creditors in the event of a major banking downturn. The pandemic has not materially undermined sovereign capacity to support banks if required.
All 21 Asia-Pacific sovereigns are currently on stable outlooks. A more severe or prolonged downturn will strain asset quality. Geopolitical tensions, slowing economies, and spiking interest rates mean nonbank financial institutions NBFIs in Asia-Pacific are vulnerable to disruptions in funding access.
The threat of cyberattacks is rising globally; increasingly interconnected banking systems are exposed to incursions that are rising in frequency, scale, and sophistication. Risk at a system level remains low, notwithstanding the interconnectedness and concentration of the Australian banking industry.
A potential data breach is the biggest cyber risk for Australian banks, with the regional banks most exposed. Proposed changes to the EU resolution regime have the potential to encompass more midsized banks and unlock the resources of national deposit guarantee schemes and the single resolution fund.
The slowing economy and tighter debt market conditions should not affect most banks' achievement of regulators' resolvability deadlines. The additional loss-absorbing capacity uplift in our ratings is stable for most European banks, but could in some cases adjust to changes in subordinated bail-in buffers. Even so, thanks to a strong start in and rising policy rates, we expect eurozone banks will report strong results in and, under our base case, also in But downside macroeconomic risks are material.
For , we have modelled the potential impact of two macroeconomic scenarios on eurozone banks' earnings--a stagnation our base case and a full-blown, though potentially short-lived, economic recession our downside case. Under both scenarios, we expect the eurozone banking system to remain profitable--even if barely so under the downside scenario. The impact of the downside scenario depends on each bank's relative exposures to sectors most at risk. It would also hinge on how well banks manage and absorb rising credit risks, as well as the pace and intensity of the ensuing recovery, which will itself depend on possible government intervention.
We currently don't expect to take widespread negative rating actions if the downside materializes. That said, we may assign negative outlooks or downgrade ratings if we start to see individual banks as less resilient than our current ratings anticipate. Fernandez spglobal. The system allows nonfinancial companies to embed financial services into their brands by renting banks' licensed products and services via advanced open banking technology, meaning banks play a role as platform or service provider.
We believe that open banking has transformed itself from a laborious regulatory process into a business opportunity for fintechs, corporates, retail customers, and banks. That said, only banks with sufficient scale, investment power, and high-end technology will likely succeed in developing their platforms enough to fully harness the opportunity.
In the medium term, banks' ability to play a strategic role in the BaaS ecosystem, as well as manage the risks involved, will influence their competitiveness and may impact their creditworthiness. This reflects the gradual recognition of credit losses globally. Banks have also restarted shareholder distributions and remain in a broadly comfortable position to absorb future losses through earnings rather than capital.
The average RAC ratio for the top banks strengthened by 12 bps in versus the prior year, partly due to banks' desire to maintain prudent capital buffers and lower dividend payments during the worst of the COVID pandemic. The gap between our RAC ratios and the regulatory Tier 1 ratios persists, mainly reflecting variations in regulators' approaches; banks' use of internal models; and the sensitivity of our RAC ratios to weaker economies. Nonperforming loans NPLs could rise moderately by basis points bps , in such a scenario.
There are signs of stability, with increasing tourist arrivals and an expected increase in private consumption. Strong capitalization and high provisioning coverage also provide downside protection. Healthcare and pharmaceuticals Health Care Credits , Sept. Low interest coverage and free operating cash flow FOCF to debt leave the industry vulnerable to expected rising interest rates and potential recessionary pressures.
Rising interest rates threaten to increase pressure on issuers in for-profit health care, especially 'B-' rated credits, deteriorating credit quality. We expect the U. Assuming the Fed continues to prioritize tamping down inflation, price pressures broadening further across the supply chain could place it in the difficult position of having to further tighten monetary policy and maintain it longer than originally expected.
Infrastructure While alternative financing models offer some relief, new investment will depend on revision of toll road regulations. Permitting reform would benefit existing in-flight projects but its broader reach will be somewhat limited. Midstream energy will be an active participant in the energy evolution and provide energy reliability and security along the way.
Turkey is also the best-performing country in the index so far this year.
| Famous sports betting scandals | But while weakest links are rising again, they are only back to summer levels, and every corporate sector's speculative-grade negative bias is below the long-term average. All 21 Asia-Pacific sovereigns are currently on stable outlooks. Structured finance markets are exposed to possible worsening of household balance sheets as higher prices bite. Samsung and Intel are also in the early stages of building semiconductor plants in the United States. Another hurdle for banks is navigating the numerous recommendations and standards to disclose climate risks, with different approaches to identifying issues to report on, and some still under development. To a large extent, much will depend on whether the Fed is able to engineer a soft landing in the United States. Tunisians Approve Consolidating Presidential Power Tunisians approved constitutional changes that solidify the concentration of power that President Kais Saied instituted over the past year. |
| Betting help sites | They will also bar US companies from exporting chip manufacturing tools to China, as well as prohibit US citizens and companies from providing any support, direct or indirect, for semiconductor fabrication plants in China. Week Of 20 June The gap between our RAC ratios and the regulatory Tier 1 ratios persists, mainly reflecting variations in regulators' approaches; banks' use of internal models; and the sensitivity of our RAC ratios to weaker economies. The key variable is labor market performance, which has so far remained robust. This marked the largest hike since Banxico adopted the overnight interbank rate as its target in But the weekly Bloomberg Nanos Canadian Confidence Index has remained in net negative territory since June 17, and consumer pessimism is now a flip of the coin |
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| Forex crunch eur usd forecast 2022-2022 | Assessing cyber risk in higher education is part of our ongoing surveillance of all of our private and public college and university ratings. Additionally, larger homecoming deals have migrated to the mainland rather than Hong Kong in recent years. But the weekly Bloomberg Nanos Canadian Confidence Index has remained in net negative territory since June 17, and consumer pessimism is now a flip of the coin Nevertheless, it is important to keep in mind that while an inverted yield curve is a strong signal that recession looms, it tells us nothing about the timing, length, or possible severity. European corporate credit quality improved inwith upgrades outnumbering downgrades; however the spec-grade proportion of issuers with 'B-' and lower ratings remains historically high, reflective of lingering credit risk from |
| Forex crunch eur usd forecast 2022-2022 | There were seven European structured finance defaults inone fewer than in Small business sentiment remains subdued while manufacturing new orders, a leading indicator of economic activity, are in contraction territory. Q4 Under The PumpOct. Issuance stalls. In July, regulators issued another round of fines on Tencent as well as a range of other firms for failing to comply with anti-monopoly transaction disclosure laws. It would also hinge on how well banks manage and absorb rising credit risks, as well as the pace and intensity of the ensuing recovery, which will itself depend sure matches possible government intervention. |
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