“EDD” or “ADD”? Look at the emerging markets bond fund ETFs. Do investors suddenly believe that the best trade of the last few years is entering a crisis stage?
Emerging Markets Update
Whether ECB President Mario Draghi will be proven correct when he said the recent LTRO issuances were an “unquestionable success,” the injection of liquidity into the system is definitely making its way around the region. However, the flows are probably not going where Mr. Draghi would have liked.
The Chinese New Year starts this week with the year of the Water Dragon. This will limit the amount of market-moving releases from the country this week and spawn a myriad of Feng Shui inspired stories about making money after a jittery year of the rabbit.
Austerity measures will keep economic growth in the EU at dismally low levels for the next two years, and the emerging countries on the fringes will most likely lag other emerging regions as well. The picture in Russia is decidedly more promising but faster economic growth may come at the price of higher inflation.
Poland’s economy looks set to weaken further as internal demand catches up to the weak external environment. Consumer inflation should moderate somewhat as the central bank will probably keep rates on hold unless growth weakens significantly.
Central and Eastern Europe (CEE) includes ten countries – Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic and Slovenia. Of these Estonia, Latvia and Lithuania are known as the Baltic countries. The CEE region constitutes about 21% of European Union’s population and covers about 25% of its area.
Turkey and Poland get upgrades by Moodys in their outlook in the banking sectors.