South African Rand, Brazil Pension Saga Top Emerging-Market Bill

JOHANNESBURG (Capital Markets in Africa) – Emerging-market investors can almost always count on South Africa to keep them on their toes these days.

Rand-denominated bonds will trade Monday for the first time since S&P Global Ratings lowered the country’s local-currency debt to junk last week. Elsewhere in emerging markets, Brazil’s government is seeking to drum up support for the pension overhaul, Mexico will nominate a new central bank governor and India will release third-quarter economic data.

South Korea and Israel head a list of central banks setting interest rates. Policy makers in Angola, Ghana, Kazakhstan and Mauritius are also due to hold meetings.

South Africa
Domestic bonds and the rand, among the worst performers in emerging markets this year, are likely to decline on Monday after S&P cut the nation’s local-currency debt to junk and Moody’s Investors Service warned it may do the same.

Read More: S&P Cuts S. Africa Local Debt to Junk; Moody’s Gives Warning

The yield on South Africa’s rand-denominated bonds due December 2026 has risen almost 80 basis points this quarter, the most since the three months ended December 2015.

India
Third-quarter economic data will show how quickly India recovered from a slowdown caused by a partial cash ban late last year. Gross domestic product increased 6.5 percent year-on-year, according to a Bloomberg survey of economists and analysts, from 5.7 percent in the three months through June.

Mexico
Investors will keep a close eye on who will be nominated as central bank governor as Augustin Carstens prepares to leave at the end of the month. The median forecast of economists surveyed by Bloomberg is for the benchmark interest rate to remain unchanged at 76 percent until the second quarter of 2018. But traders on Thursday increased bets on a rate hike after Mexico’s inflation unexpectedly climbed in the first half of November.

Read more: Some Banxico Members: Fed Increase Could Create Need for Hike

Brazil
Traders will monitor the progress of the pension overhaul as the government seeks support from 70 to 80 additional lower house deputies in the coming two weeks to get the bill approved. The administration is said currently to have 250 of the 308 votes required. Last week, Brazil’s real and stocks rose after President Michel Temer was said to have struck a tentative deal with Lower House Speaker Rodrigo Maia to put the bill to vote in early December.

China
Whether or not the plunge in Chinese stocks on Thursday was a blip or the beginning of a reversal in this year’s rally should become more evident as the week progresses. Data-wise, there are industrial profit figures on Monday and a manufacturing gauge due Thursday that may provide additional clues. The Shanghai Composite Index and Hang Seng China Enterprise Index have climbed 8 percent and 27 percent, respectively, so far in 2017.

South Korea
The Bank of Korea will raise its policy rate Thursday, according to most economists surveyed by Bloomberg, which would make it the first Asian emerging-market central bank to increase borrowing costs this year. Expectations for tightening have fuelled a 5.5 percent gain in the won so far this quarter, the most among developing-nation currencies.

Source: Bloomberg Business News