{"id":291858,"date":"2019-01-01T10:45:17","date_gmt":"2019-01-01T08:45:17","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=291858"},"modified":"2019-01-01T10:45:17","modified_gmt":"2019-01-01T08:45:17","slug":"a-guide-to-emerging-market-risks-in-2019","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/291858\/a-guide-to-emerging-market-risks-in-2019\/","title":{"rendered":"A guide to emerging market risks in 2019"},"content":{"rendered":"
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Emerging markets are tentatively picking themselves up from the floor after a rout that\u2019s wiped about $5 trillion off the value of stocks since a high in January 2018. But the reprieve may not last long.<\/p>\n

Rising rates in the US, a stronger dollar, Beijing and Washington\u2019s trade war, lower oil prices and the emergence of populist leaders in Latin America\u2019s two biggest economies could all weigh on markets.<\/p>\n

\u201cThe theory is dead simple: emerging-market assets have already bombed, so the downside, if things get worse, is much lower and if things recover they have greater potential to perform,\u201d said Anthony Peters, an independent analyst, formerly at Blockex Ltd, who\u2019s long covered developing nations.<\/p>\n

However, \u201cthey have the potential to go much lower for much longer than anybody had ever thought possible.\u201d<\/p>\n

The Fed and the Dollar<\/strong>Investors will be carefully watching the US Federal Reserve after Chairman Jerome Powell wasn\u2019t as dovish as they\u2019d hoped in comments that followed the central bank\u2019s interest-rate increase on Dec. 19.<\/p>\n

A report said President Donald Trump has repeatedly discussed firing the central bank chief, but Treasury Secretary Steven Mnuchin moved to reassure financial markets that Powell wouldn\u2019t be ousted.<\/p>\n

Added to that, the European Central Bank is set to end asset purchases that have pushed billions of euros into higher-yielding markets such as Poland and Hungary. That may force eastern European monetary authorities into rate increases they\u2019ve long resisted.<\/p>\n

In emerging Asia, economies heavily reliant on foreign investments, such as Indonesia, will face the challenge of maintaining currency stability and stemming outflows.<\/p>\n

Trade Wars and China<\/h3>\n

Chinese President Xi Jinping remains defiant, telling some of the nation\u2019s most influential military and business figures that Beijing won\u2019t back down quickly to US trade and investment demands.<\/p>\n

Any increase in tensions between the world\u2019s two dominant economies would probably deal a blow to Asian assets.<\/p>\n

They\u2019ve already taken a hit, with China\u2019s main stock index suffering its worst year since 2008 and equities in South Korea and Taiwan also falling sharply.<\/p>\n

A US trade delegation is preparing to travel to Beijing for talks slated for the week of Jan. 7, Bloomberg News reported in December, citing two people familiar with the matter.<\/p>\n

Populists<\/h3>\n

Brazil and Mexico start 2019 with new populist presidents, albeit from opposite ends of the spectrum.<\/p>\n

Brazilian stocks rose to record highs after President-elect Jair Bolsonaro said he\u2019d sell dozens of state-owned companies and picked University of Chicago-trained Paulo Guedes as his chief economic adviser.<\/p>\n

Still, the right-winger faces a tough challenge reforming the country\u2019s generous and exhausted pension system, which will be key to sustaining the market rally.<\/p>\n

In Mexico, leftist Andres Manuel Lopez Obrador has traders on edge after canceling a $13 billion airport.<\/p>\n

Some concerns diminished after he published a conservative fiscal plan for 2019 and after bondholders accepted Mexico\u2019s offer to buy back $1.8 billion of debt used to fund the airport\u2019s construction.<\/p>\n

Nonetheless, investors will watch to see if the president can maintain a primary budget surplus even while spending more on social programs.<\/p>\n

Russian Sanctions<\/h3>\n

Even after the US Treasury said it\u2019s ready to lift sanctions on one of Russia\u2019s biggest companies, United Co. Rusal, investors will be wary of moves by Congress.<\/p>\n

If Special Counsel Robert Mueller\u2019s investigation into the Kremlin\u2019s interference in the 2016 American election reaches a damning conclusion, that could trigger new penalties, including restrictions on trading Russian sovereign debt or banks.<\/p>\n

Saudi Oil Woes<\/h3>\n

Brent crude\u2019s plunge since early October to below $55 a barrel is bad news for many major developing economies, not the least Saudi Arabia. It needs prices as high as $95 per barrel to balance its 2019 budget, according to Bloomberg Economics.<\/p>\n

The financial squeeze – combined with the Western backlash over columnist Jamal Khashoggi\u2019s murder in Istanbul – means that MSCI\u2019s decision to include Saudi stocks in its emerging-market index in 2019 might not be enough to attract the investment the kingdom desperately needs.<\/p>\n

Elections<\/h3>\n

There are plenty of upcoming polls to keep traders on edge. Indians vote in a general election in April or May and analysts at Credit Suisse Group AG say markets haven\u2019t priced in the risk of a coalition government emerging, which could derail Prime Minister Narendra Modi\u2019s economic reforms.<\/p>\n

Thailand is set to hold a vote Feb. 24 after several delays since the ruling party took over in a bloodless military coup in 2014, and investors are worried about the prospect of social unrest.<\/p>\n

Indonesia\u2019s turn is April 17 – a rematch between President Joko Widodo and his rival Prabowo Subianto.<\/p>\n

In Argentina, Mauricio Macri, who\u2019s popular with foreign investors, faces an election in October. With the economy in a recession and inflation at almost 50%, investors are concerned that voters may turn to former populist President Cristina Fernandez de Kirchner.<\/p>\n

South Africa\u2019s election in May will be a key test for President Cyril Ramaphosa.<\/p>\n

If his party fails to win a significant majority, he may be forced to delay market-friendly reforms such as revamping debt-laden state companies by retrenching workers or selling assets.<\/p>\n

That could trigger a credit-rating downgrade and billions of dollars of outflows, according to Citigroup Inc.<\/p>\n

Nigerians vote in mid-February. Their main choice is between President Muhammadu Buhari, who\u2019s struggling to buoy an anemic economy, and former Vice President Atiku Abubakar, seen as more pro-business but who\u2019s long been dogged by allegations of corruption, which he\u2019s denied.<\/p>\n

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Read: Why your New Year\u2019s resolutions won\u2019t work out<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Emerging markets are tentatively picking themselves up from the floor after a rout that\u2019s wiped about $5 trillion off the value of stocks since a high in January 2018. But the reprieve may not last long.<\/p>\n","protected":false},"author":59,"featured_media":259409,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[26],"class_list":["post-291858","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/291858","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=291858"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/291858\/revisions"}],"predecessor-version":[{"id":291860,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/291858\/revisions\/291860"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/259409"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=291858"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=291858"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=291858"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}