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EM Credit Risk Blows Out Dramatically Amid FX Bloodbath, Fed Fears, Political Risk
In the wake of the global commodities rout which recently saw prices touch their lowest levels of the 21st century, there’s been no shortage of commentary (here or otherwise) on the pain that’s been inflicted on commodity currencies and by extension, on EM.
As it stands, the world’s emerging economies face a kind of perfect storm triggered by a combination of the following factors: falling commodity prices, depressed Chinese demand, and the threat of an imminent Fed hike. All of this has contributed to capital outflows, which has in turn led some reserve managers to begin liquidating their store of USD-denominated assets to help offset the bleeding and indeed, it now looks as though Brazil will eventually be forced to capitulate and dip into the reserve cookie jar to help arrest the BRL’s terrifying slide.
All of this is of course complicated by idiosyncratic political risks.
Take Malaysia for instance, where the 1MDB scandal threatens the political career of Prime Minister Najib Razak.
Or Brazil, where President Dilma Rousseff’s abysmal approval rating and a fractious Congress have made implementing desperately needed austerity measures virtually impossible.
And there is of course Turkey, where Recep Tayyip Erdo?an has effectively plunged his country into civil war in order to preserve AKP’s dominance and pave the way for constitutional amendments that will allow him to consolidate his power.
The risks facing EM are in fact so acute and closely watched that the threat of accelerating capital outflows effectively forced the Fed to delay liftoff earlier this month.
With the situation deteriorating virtually by the day (and if you think we’re being hyperbolic there, just take a look at the news flow from Brazil last week), we thought it an opportune time to highlight the spike in EM credit risk as shown in the following chart:
As you can see, multi-year wides on all accounts other than Russia and that's only because the spike late last year that accompanied the plunge in crude prices and attendant ruble rout have made for a tough compare.
So sure, go ahead and hike Janet...
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CLICK YOUR HEELS JANET!! 3 TIMES!!!
DO IT!!! THE TORNADO IS CLOSE!!!
Toto! Drop those panties immediately!
Sloppy seconds.
The problem is: China was the final, last place on earth where an enormous supply of underclass workers were content to be exploited to allow the creation of massive fortunes.
From now on, no one’s gonna be able to acquire any wealth without actually working hard or being a criminal.
The slightest bit of market strength is now sold into, what a change from just a few months ago.
Kevin Spacey: Frank Underwood ‘would kill Donald Trump’
http://tinyurl.com/oal7xkn
enough said:
http://www.gettyimages.com/detail/photo/side-profile-of-a-man-hanging-up...
2015.75 cometh.
And goith.
Umm, first, it's "goeth", no "goith", which I can only imagine is a goyish loincloth.
Second, 2015.75 isn't due until tomorrow/Thursday. So...
Either way, it will come and go like any other day.
I thought "goith" was some kid from Brooklyn dressed all in black.
the threat of qe4 not coming soon enough is more like it. the fed will never hike rates and everyone KNOWS IT.
Music to my ears
Time waits for no one, not even QE4.
Absurd, isn't it? The actions of a human being that, by deception, has false authority over other human beings, in conjunction with graphs based on abstract concepts can dictate the life of billions of sovereign human beings.
My EM standard is Brazil. They are massively over exposed to China. They are essentially a nationstate version of Glencore.
My money (such as it is) is on Brazil to shit the bed first.
janet doesn't hike, she holds
https://www.youtube.com/watch?v=055wFyO6gag
Venezuela and Nigeria are not far behind....huge problems in both countries....but even the strong ones...Saudi Arabia are having problems...this could be and us vs them...its not going to be a good year for tourism in some of those countries for the Western world....as they lay the balme on us..
On a positive note Brazil is still the place to be to avoid getting your ass smoked in the next war