What has changed in EM - BBH

Marc Chandler, Global Head of Currency Strategy at Brown Brothers, shares his views on the emerging markets with the key quotes found below:

"Hong Kong boosted its 2017 growth forecast.  The government raised its forecast to between 3-4%, up from the 2-3% range seen in May.  The move came after Hong Kong posted stronger than expected GDP growth of 3.8% y/y in Q2."  

"S&P moved the outlook on Israel’s A+ rating from stable to positive.  S&P sees growth averaging 3.2% over next four years, while the balance of payments performance is expected to stay strong.  S&P noted that the positive outlook reflects potential for a better than expected fiscal performance over the next two years."  

"The corruption investigation against Israeli Prime Minister Netanyahu has intensified.  His former chief-of-staff Ari Harow has agreed to testify against him in a plea deal in an unrelated offense.  Netanyahu has denied all allegations but Harow’s plea deal opens up a whole new front."

"South Africa's parliament voted down the no confidence motion against President Zuma.  However, the 198-177 vote (with 9 abstentions) was very, very close.  With over two dozen ANC lawmakers voting against Zuma, the vote suggests a bruising battle ahead for the ANC leadership this December.  Bottom line:  we think the rand will continue to underperform."

"Argentina officials are taking steps to support the peso.  The central bank has started selling more dollars.  Furthermore, requests from individuals seeking to buy more than $10,000 are reportedly being rejected by local banks.  Peso weakness has picked up ahead of this weekend’s primary elections, where former President Fernandez is expected to do well in her quest for a senate seat."

"Banco de Mexico has likely ended its tightening cycle.  After hiking at seven straight meetings, rates were kept steady for the first time since last August.  The statement strikes us as being on the dovish side, saying that inflation has likely peaked and will turn lower in H2.  It added that the current policy rate is consistent with moving inflation back to the 3% target."    

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