Emerging Markets in Focus: Nigeria, Chile, S. Africa, Hungary, India

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  • Chile holds the first round of presidential elections
  • Moody’s, S&P to make announcements about South Africa ratings

CMC Markets’ Yang Is Positive on Emerging Market Equities

Chile’s presidential elections, the fate of South Africa’s local-currency ratings and Nigeria’s sale of $2.5 billion of Eurobonds will provide the focal points for emerging market investors in the coming week.

That’s aside from the plethora of data that will help shape monetary policies across developing markets, with central banks in Hungary, Argentina, Kenya, Nigeria, Zambia, Colombia and South Africa deciding interest rates.
Chile

Chile held a first round of elections that may see the return of billionaire former president Sebastian Pinera. Polls closed at 4 p.m. New York time on Sunday. Pinera, who is widely seen as business-friendly and has pledged to cut public spending and reduce Chile’s fiscal deficit, took a smaller-than-expected lead in early counting.

Read more on Chilean election results here

The country’s benchmark IPSA index hovers around a record high on the expectation that the new president will usher in a period of growth. Expectations for Pinera are high, as Chile has seen a four-year decline in investment, the longest stretch since at least 1986.

Nigeria

Nigeria may issue a Eurobond of at least $2.5 billion, according to Kevin Daly, a money manager at Standard Life Aberdeen, who attended an investor meeting with officials from the nation in London last week. The offering will probably see a lot of interest from investors given strong demand for emerging-market assets and the rally in oil prices, according to M&G Investments.

Third-quarter gross domestic product figures are due on Monday, and the central bank meets to decide its key rate the following day, with economists forecasting no change at 14 percent.
South Korea

Reports on trade, producer prices and consumer confidence may provide clues about the durability of the won’s rally. The South Korean currency advanced 1.8 percent against the dollar last week on anticipation that the central bank will probably raise borrowing costs, taking its gain since the end of September to 4.4 percent. That’s more than twice as much as the next best-performing Asian currency.

South Africa

South Africa will probably keep its interest rate unchanged at 6.75 percent at a policy meeting on Thursday, according to all 15 estimates compiled by Bloomberg.

The following day, Moody’s Investors Service, which rates the nation’s foreign- and local-currency debt at one level above junk, is scheduled to make an announcement. S&P Global Ratings, which is also due to review its reading the same day, has South Africa’s rand debt at the lowest investment grade, and foreign securities at the highest junk level.

Hungary

Investors expect policy makers to outline steps to lower long-term borrowing costs. Potential instruments may include offering interest-rate swaps at a discount to market rates, on the condition that lenders cut mortgage spreads.

Ten-year yields have fallen about 60 basis points since policy makers first signaled their intention to flatten the yield curve in September, reducing the spread over one-year notes to about 220 basis points from as wide as 345 in March.
India

Moody’s upgrade of India’s credit rating gave its bonds, stocks and currency a boost on Friday. Investors will be watching to see if the assets keep rallying this week, but some say the reaction to the upgrade, a vindication of Prime Minister Narendra Modi’s reform program, will likely be short-lived.

Taiwan

The won’s rise could be a boon for Taiwan, South Korea’s main rival as an electronics exporter. The island reports October export order numbers on Monday, with analysts forecasting a year-on-year increase of 8 percent, from a 6.9 percent gain in September, a Bloomberg survey shows.

The Bank of Korea lost its grip on the won, analysts at Yuanta Securities Co. in Taipei said in a note, adding that they are keeping a close eye out for any reaction from Taiwan’s central bank.

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