Russia Is This Week’s Emerging-Market Focus as the G-20 Meets on Trade

Updated on
  • Russia, U.K. tension rises; Moody’s to decide on South Africa
  • Mozambique to hold call with investors on debt restructuring

Putin Wins a Fourth Term. All Downhill From Here?

Emerging-market investors are bracing for further fallout from allegations Russia was behind a nerve-agent attack in the U.K., overshadowing an election that extended Vladimir Putin’s tenure as the Kremlin’s longest-serving leader since Josef Stalin.

Elsewhere, traders will be rooting for Group-of-20 finance ministers and central bankers to find ways to avoid a global trade war when they meet in Argentina on Monday and Tuesday, while Wednesday’s Federal Open Market Committee meeting should provide guidance on the path of U.S. monetary policy. Bloomberg Economics estimates a trade war could chop $470 billion from the global economy by 2020.

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A gauge tracking developing-nation currencies ended little changed last week, while the MSCI Emerging Markets Index of stocks advanced for a second week.

Politics in Russia and Peru

There’s little market impact expected from Russia’s presidential vote, which saw Putin cruise to a landslide victory with record support amid an escalating confrontation with the West. Traders will be focused on any cabinet changes that may follow and developments in the unfolding diplomatic spat with the U.K. over the poisoning of an ex-spy on British soil. The Bank of Russia is expected to push on with rate cuts when it meets March 23. The ruble was the worst emerging-market currency last week after the Turkish lira.

What You Need to Know About Emerging Markets This Week: Audio

In Peru, President Pedro Pablo Kuczynski will face a second impeachment vote in three months on Thursday over allegations he lied to hide ties to the Brazilian building giant Odebrecht. The sol, which has never fully recovered from impeachment speculation last month, could see a relief rally if the former Wall Street veteran survives once more.

Downgrade Risk

Moody’s Investors Service is scheduled to publish its rating on South African debt on March 23 after cutting the country one level in June. A downgrade would kick South Africa out of the Citi World Government Bond Index and the Bloomberg Barclays Global Aggregate Index. It could trigger outflows of as much as $6 billion, RMB Morgan Stanley estimates.

Restructuring Call

Mozambique is set to hold a call with investors to outline its proposal for a debt restructuring. This is the first time formal talks will have been held since the nation defaulted on its Eurobonds in January 2017.

Meanwhile in Venezuela, opposition candidate Henri Falcon is expected to unveil more details about his plan to restructure the nation’s foreign debt should he win the May presidential election. The government is expected to complete the first private sale of its homemade cryptocurrency, with President Nicolas Maduro previously announcing more than $5 billion in purchase offers.

New Chief

China named Yi Gang to run its central bank, elevating a long-serving deputy governor with deep international links to the forefront of efforts to clean up the nation’s financial sector and modernize monetary policy. The promotion of an official who has served as No. 2 to incumbent governor Zhou Xiaochuan for more than a decade, comes at a time of heightened awareness of the risks facing the economy, from a broader trade-war with the U.S. to a long-feared financial blowup.

Brazil’s central bank is forecast to cut its benchmark rate on Wednesday to an all-time low of 6.5 percent. Elsewhere, Indonesia, Philippines and Taiwan’s policy makers meet on Thursday. All are expected to keep their benchmark rates unchanged, according to Bloomberg surveys.

The spotlight will be on the Bangko Sentral ng Pilipinas after inflation accelerated last month to almost breach the central bank’s target band. The Philippine peso is Asia’s worst-performing currency this year as officials have flagged they won’t be rushing to raise rates to curb inflation.

— With assistance by Colleen Goko

(Updates with details of Russia vote in fourth paragraph.)
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