(from my colleague Dr. Win Thin)
In the EM equity space as measured by MSCI, Qatar (+4.8%), Russia (+3.3%), and Singapore (+2.9%) have outperformed this week, while Mexico (-3.1%), Taiwan (-2.4%), and the Philippines (-2.2%) have underperformed. To put this in better context, MSCI EM fell 0.3% this week while MSCI DM rose 0.8%.
In the EM local currency bond space, Turkey (10-year yield -47 bp), China (-19 bp), and Brazil (-16 bp) have outperformed this week, while India (10-year yield +29 bp), Indonesia (+23 bp), and Hong Kong (+19 bp) have underperformed. To put this in better context, the 10-year UST yield rose 9 bp to 2.93%.
In the EM FX space, RUB (+1.1% vs. USD), TRY (+1.0% vs. USD), and BRL (+0.5% vs. USD) have outperformed this week, while MXN (-3.0% vs. USD), COP (-1.7% vs. USD), and INR (-1.4% vs. USD) have underperformed. To put this in better context, MSCI EM FX fell -0.3% this week.
The Reserve Bank of India is tilting more hawkish. Minutes from the last meeting showed Deputy Governor Acharya switching from a neutral stance to “decisively to vote for a beginning of ‘withdrawal of accommodation’ in the next monetary policy meeting in June.” This will bring the number of MPC members voting for a hike up to two.
Tensions on the Korean peninsula are easing. After the secret visit by Secretary of State-designate Pompeo, direct talks between the North and the US appear likely. North Korea has reportedly removed a key obstacle to negotiations with the US. According to South Korean President Moon, Pyongyang is no longer demanding that US troops be removed from South Korea as a condition for denuclearizing.