This Week in Emerging Markets

August 10, 2014

By: Darren Viegas

Emerging Market Stocks Retreat After Russia Bans Food Imports

EM equity markets have fallen to a six week low as Russian Retailers dropped on news that Vladmir Putin has retaliated against the US and EU through bans on food imports. Russian import curbs include all cheese, fish, beef, pork, fruit, vegetables, and dairy products from the US & EU. Russian retailers have dropped because 15-30% of their revenue is derived from food products.

Sore Loser in Indonesian Presidential Elections Plays the Fraud Card

Prabowo Subianto- the Indonesian candidate who lost the election with 46.85% compared to the winner Joko Widodo’s 53.15%, is now claiming that Widodo has won through electoral fraud. This  is being called absurd and largely being dismissed by the national courts as the winner’s margin of votes- nearly 8 million- hardly makes it a case for argument.

BNY Mellon Managed Fund Loses 51% on Argentina Default

BNY Mellon has stated that one of its Brazil based investment funds has written off more than half the value of its assets, due to the losses from an Argentinan sovereign default. Brasil Sovereign II Fundo de Investimento de Divida Externa FIDEX to a look of 197.9 million reais ($87.2 million). Argentina failed to make a $539 million interest payment on its bonds, forcing S&P Fitch to declare the country in default, the second time since 2001.

Ibovespa Leads World Gains as PetroBras Rises Amid Election Bids

The Brazilian Ibovespa index gained the most out of major equity benchmarks, as the old producer Petroleo Brasilerio gained amid speculation in the upcoming elections. The speculation is that a change in government will lead to reduced market intervention from the government on state owned companies. LenderBranco do Brasil SA, also a state owned company, rallied as traders priced in an interest rate hike. According to major hedge funds, the election news is making the market very volatile, as any election poll will move the market significantly.

Brazil’s Swap Rates Decline on Tombini View Inflation Will Slow

Brazilian swap rates have fallen on the day after central bank president Alexandre Tombini said inflation will slow toward the official target rate. Swap rates fell 13 basis points to 11.73%. According to Tombini, inflation is under control and will end in the target ranfe of 2.5%-6.5%. Consumer prices rose 6.6% in July, after policy makers decided to hike the selic rate to 11%.

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