Markets

A Dark Cloud Still Hangs Over Emerging Markets


EM starts the week off on softer footing, as Friday’s jobs report supports the notion of December Fed lift-off.  USD/ZAR is making new all-time highs, and we expect most of EM to revisit the lows from August and September as the lift-off approaches.  Barring a disastrous November jobs report, we believe a rate hike will happen on December 16.  As such, we remain negative on EM near-term.

India's BJP not Feeling the Love in Bihar Election


As the Hindi saying goes:  If you live in the water, do not make an enemy of the crocodile.

The ruling party in India, the BJP, was defeated in the Bihar state assembly elections.  The party came out with 59 seats out of 243, down 35 seats from the previous elections and considerably worse than expected.  Many were looking at the Bihar elections as a referendum of sorts on Modi’s first 17 months in power. 

Can a National Minimum Wage Lower South Africa's Gini Coefficient?


Minimum wages have played a central role in reducing inequality in countries as diverse as Indonesia, the UK, and Brazil. Traditionally seen as a means to ensure workers earn enough to meet their basic needs, minimum wages received more attention over the last two decades as a means to help create a more equitable society.

South Africa is one of the most unequal societies in the world with a Gini coefficient (where zero is perfect equality and one is perfect inequality) of a staggering 0.66, more than double the average of OECD countries.

The Turkish Election and Central Bank News Headline the EM Space


1) The AKP won a majority in the Turkish elections; 2) Colombia’s central bank unexpectedly hiked rates by 50 bps to 5.25% and added some new FX measures to its arsenal; 3) China will lift a freeze on IPOs by the end of the year; 4) Petrobras workers went on strike; 5) The National Bank of Hungary is turning to unconventional measures; 6) Czech central bank now sees an exit from the koruna cap as likely around the end of 2016; 7) Kazakhstan has a new central bank governor

Saber-rattling over the South China Sea Could Delay Regional Plans


Recent naval manoeuvres and land reclamation activities in the Spratly Islands have drawn attention to the risk of incidents at sea leading to growing tensions and even conflict in the South China Sea. On Tuesday 27 October 2015, the United States Navy sent its state-of-the-art guided-missile destroyer USS Lassen into waters within 12 nautical miles of Subi Reef, which China claims. Chinese naval vessels shadowed the USS Lassen until it left the waters around Subi Reef and Mischief Reef.

India Facing Trade and Investment Diversion


The conclusion of the Trans-Pacific Partnership (TPP) negotiations in early October 2015 has marked another substantive milestone in the global trade order. Rising doubts over domestic ratification aside, the world is keeping a wary eye open as it tries to grasp how the TPP will affect other ongoing free trade agreements (FTAs) and multilateral trade talks.

China's President Xi Sticks with a New Growth Plan


Overnight, Chinese President Xi Jinping gave the strongest indication yet the country will revise down its economic growth goal to 6.5%.

They will have an official target when China releases its highly anticipated 13th five-year plan in March next year, but they are playing on the idea of the “economic new norm.” This means lower percentage rates of economic growth (although rates still high in international terms) coupled with structural economic reform.

No Change in Rates from the RBA for Now


The Reserve Bank of Australia has decided to leave the official cash rate unchanged at a record low of 2%, but said there was scope for a rate cut down the line.

In a statement on the RBA website, governor Glenn Stevens said:

China's Possible Population Problems


The long-anticipated abolition of China's one-child policy is a first step in the right direction. However, they can do much more.  In the West, the criticism of the one-child policy is that it is a "cruel Communist strategy." In reality, most opponents of that policy were Marxists and the idea itself came from the West.

Overpopulation or old population?