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Emerging Markets Daily - May 26
China Stocks Show Bullish Signs, EM Currencies Hit All-Time High, Cyclone Lashes East India, China Rising as UK Top Import Source, Mexico's Bloody Election Season
The Top 5 Emerging Markets Stories from Global Media - May 26
China Stocks Rally Shows Signs of Life, New Bullish Signs
“China’s stocks burst out of a tight trading range this week, and that may just be the start given the bullish signs for the market that have been forming under the hood.”
“The country’s equity benchmark closed little changed with materials and financial shares being the best performers. The move came after the CSI 300 Index jumped 3.2% on Tuesday, the most since July as investors piled into stocks amid attempts by policymakers to contain commodity prices.”
“But even before that, momentum was showing signs of gathering. The CSI 300 Index has staged the largest monthly outperformance against the S&P 500 Index and MSCI Asia Pacific Index since at least January this month, while the Shanghai Composite is poised for its best May performance since 2013.”
“Investors are now watching to see whether the recent strength, coupled with the yuan advancing to its strongest level since 2018, could set the stage for the next leg higher for a market stuck in months of range-bound trading. The People’s Bank of China set its daily reference rate for the yuan around estimates on Wednesday, signaling that authorities are comfortable with the Chinese currency’s recent rally.” Bloomberg reports.
EM Currencies Hit All-Time Highs, Dollar Hits 5-Month Low
“An index of emerging market currencies touched all-time highs on Wednesday as the dollar languished at near five-month lows, although the Belarusian rouble lagged amid tensions with the West.”
“Turkey's lira staged a modest recovery after the replacement of yet another central banker saw it post its worst day in two weeks on Tuesday, while South Africa's rand held near highs last seen more than two-years ago.”
“The dollar remained close to five-month lows as easing inflation worries prompted investors to seek returns from higher yielders. ‘The continual commentary from (U.S. Federal Reserve) officials reinforcing the current Fed accommodative policy is pushing U.S. yields lower, keeping the dollar on the back foot, and helping risk appetite,’ said Andre Cilliers, currency strategist at TreasuryONE.”
“Russia's rouble rose 0.14%, hovering close to mid-March highs. Leaders of Russia and the United States will meet in Geneva on June 16, the nations said on Tuesday, amid sharp disputes over election interference, cyber atttacks, human rights and Ukraine.”
“Both countries, however, have lowered expectations for breakthroughs, with neither in a mood to make concessions on their many disagreements.”
“Meanwhile, a Reuters poll showed expectations Russia's stock market would hit 3,819 to notch a record high by year-end thanks to a recovery in commodity prices and still-low interest rates globally. The MOEX index was last trading at 3,703.09 after touching a new high of 3,717.33 earlier in the session.”
“MSCI's index of EM stocks extended gains for a second straight session to climb to a 16 day high with tech stocks showing healthy gains.” Susan Mathew reports.
Powerful and “Very Severe Cyclonic Storm” Batters Eastern India
“More than a million people in India have been evacuated as a powerful cyclone has started making landfall on its eastern coast on Wednesday.
“Cyclone Yaas, which intensified into a ‘very severe cyclonic storm’, hit the state of Orissa, also known as Odisha, and will take two hours to cross over.”
“This is the second cyclone to hit the country in a week, after Cyclone Tauktae killed more than 150 people. It comes as India is already struggling to deal with its Covid-19 outbreak.”
“Yaas lashed coastal areas with ferocious wind and rain as it made landfall, damaging buildings. India's meteorological department said low-lying areas near the coast have been inundated due to the rain and tidal surges accompanying the cyclone.”
“Many coastal villages in West Bengal state, neighbouring Orissa, were flooded by sea water. Army teams have been deployed to rescue 32 people stranded in a coastal district because of a storm surge. Weather department officials say they expect wind speeds of 140km/h (87mph) gusting to 155km/h (96mph) as the cyclone completes the process of landfall over the next few hours.” BBC reports.
China Overtakes Germany as UK’s Top Import Market
“China has overtaken Germany to become the UK's biggest single import market for the first time since records began.”
“Goods imported from China rose 66% from the start of 2018 to £16.9bn ($24bn) in the first quarter of this year, the Office for National Statistics said.”
“Imports from Germany fell by a quarter to £12.5bn in the same period.”
“The change came as trade with the European Union was disrupted by Brexit and the pandemic boosted demand for Chinese goods.” BBC News reports
Dozens of Mexican Candidates Have Been Killed in a Bloody Election Season
The Wall Street Journal
“…Even in a country with a history of electoral violence, this vote is shaping up as the most bloody in recent memory as more, smaller criminal gangs viciously compete to control local areas by intimidating or killing off politicians.”
“From February to April, 46 elected officials, members of political parties and candidates for office were killed, a 44% jump compared with the 2018 elections, according to Integralia, a Mexican political consulting firm. Since September, when the electoral process began, 82 politicians have been killed, most of them gunned down.”
“Behind the rise in violence are the evolving dynamics of Mexico’s organized crime. In recent years, drug cartels have diversified into new criminal activities. Aside from trafficking drugs to the U.S., these gangs smuggle migrants, sell black-market gasoline, and extort legal businesses which range from avocado farms to taco stands. Once in control of local governments, the gangs also take a cut of tax money meant for public works, according to organizations that track and analyze crime trends.” Juan Montes and José de Córdoba report