EM Review: Optimism Over Vaccine, Trade Helped Boost Risk Assets

(Bloomberg) -- Emerging-market stocks and currencies posted a weekly gain amid progress toward a coronavirus vaccine and after the U.S. and China said they remained committed to the phase-one trade deal. Risk assets were also given a boost after Federal Reserve Chair Jerome Powell signaled a more relaxed attitude toward inflation. A gauge of developing-nation stocks erased this year's decline.

The following is a roundup of emerging-market news and highlights for the week through Aug. 30:

Click here for our emerging-markets weekly preview.

Highlights:

• Powell unveiled a new approach to setting U.S. monetary policy, letting inflation and employment run higher in a shift that will likely keep interest rates low for years to come
• President Donald Trump said a coronavirus treatment that involves blood plasma donated by people who've recovered from Covid-19 will be expanded to more sick Americans
  • Moderna Inc. said it plans to provide 80 million doses of its experimental coronavirus shot to the European Union following a string of supply deals between vaccine developers and governments
• The U.S. and China reaffirmed their commitment to the phase-one trade deal in a biannual review
  • China is looking to turn on the charm in Europe to push back against a U.S. campaign for allies to shun cooperation with Beijing
  • TikTok asked a federal judge to block the Trump administration from enacting a ban on the fast-growing social media network; Chief Executive Officer Kevin Mayer resigned
  • ByteDance Ltd. will be required to seek Chinese government approval to sell the U.S. operations of TikTok, according to a person familiar with the matter
  • China is set to buy a record amount of American soybeans this year, according to people familiar
  • U.S.-China tensions over the South China Sea escalated, with Beijing firing four missiles into the waters around the same time as the Trump administration took action against Chinese companies that helped set up outposts in the disputed region
  • China said it has made concessions in proposing to let U.S. regulators to audit some of its most sensitive companies and is calling for direct talks
  • U.S. durable goods order rose in July by more than double estimates amid a surge in automobile demand
  • Japanese Prime Minister Shinzo Abe said he would resign to undergo treatment for a chronic illness, ending his run as the country's longest serving premier
  • Abu Dhabi returned to the dollar debt market, selling the longest bond ever offered by Gulf Arab governments as countries in the region raise cash buffers to weather the pandemic and low oil prices
  • Peru has set another grim record by reporting the highest number of deaths per capita from the coronavirus

  Asset moves	Weekly
  MSCI EM stocks index	+2.7%
  MSCI EM FX index	+0.9%
  Bloomberg Barclays global EM local currency bonds index	+0.5%

  Asia:

  • China's banking regulator pledged its backing for Hong Kong as a finance hub
    • The Chinese government will restrict citizens' trips to some overseas cities and scenic spots that are on a “blacklist” of cross-border gambling
    • China will import $300 billion of semiconductors for the third straight year
    • Borrowing costs in China are spiking as the central bank holds back on aggressive easing
    • China's economy picked up speed in August as a strong industrial sector and stock market, better business confidence and home and car sales combined to boost the first economy globally to emerge from the Covid-19 slump
  • India's central bank saw its balance sheet increase by 12.3 trillion rupees ($167 billion), gold holding raised by 43.25 tons to 661.41 tons; it said demand in the economy is likely to take more time to mend in the absence of greater fiscal support
    • Joblessness may be easing in India but wage growth remains subdued
    • Business activity in India picked up in July

    • Bank of Korea's Governor Lee Ju-yeol held off from adding immediate stimulus as the central bank said it expects the economy to shrink 1.3% this year

      • South Korea is studying the need to raise social-distancing restrictions to the highest level
      • The nation's consumer confidence climbed to a six-month high in August
      • South Korea extended eased liquidity coverage ratio regulations for banks to end of March, while regulators extended a ban on short-selling of shares listed on some exchanges for another six months, as the nation grapples with the coronavirus outbreak.
      • Indonesia's central bank is preparing a new regulation that will require large exporters of natural resources to convert foreign exchange earnings into rupiah
        • Indonesia projects third-quarter gross domestic product growth at 0% to -2%
        • Hundreds of Indonesian workers rallied outside parliament against legislation meant to make it easier for companies to hire and fire employees
        • Indonesia's capital extended the implementation of some social distancing measures
        • Indonesia reported a record daily surge in new coronavirus cases
        • Virus outbreaks forced factories in one of its biggest manufacturing hubs to shut
        • The Philippine central bank kept its key interest rate on hold; Governor Benjamin Diokno said it's entirely possible to keep policy unchanged for the rest of the year
          • President Rodrigo Duterte dissociated himself from calls by his supporters to scrap the Constitution and set up a federal government
          • The House of Representatives approved the final version of a 165.5 billion-peso ($3.4 billion) pandemic relief bill
          • The Philippines plans to borrow 3.025 trillion pesos next year, two-thirds of the proposed budget
          • The Philippines is considering issuing debt that pays interest based on the country's economic performance after gross domestic product plunged
          • Thailand is looking to construct a land passageway that would connect the Indian and Pacific Oceans, while the Transport Ministry plans to accelerate spending on roads and rail projects starting in October
            • Thailand's exports showed signs of improvement and trade indicators suggest a nascent recovery
            • Facebook said it's preparing to legally challenge the Thai government's request to block access to a private group critical of the monarchy
            • Thailand's Finance Minister Predee Daochai said the economy will likely bottom out in the second half of the year and rebound in 2021
            • Thai government may allow foreigners who own properties in the Southeast Asian country to return
            • Malaysia is set to raise the limit on government debt for the first time since 2009 after parliament's lower house approved the move
            • An investigation by the U.S. Treasury found Vietnam deliberately undervalued its currency by about 4.7% against the dollar in 2019, according to a letter sent to the U.S. Commerce Department

            EMEA:

            • Lebanon's former premier Saad Hariri said he doesn't want to be nominated to form a new government and his party will name someone suitable for the post during consultations with the president
              • Lebanon suffered another inflation surge in July as the country's financial meltdown continued
              • Lebanon's consumer prices rose an annual 112.4%, compared with just under 90% in June, according to the Central Administration of Statistics. Inflation was below 20% as recently as in March
              • The United Nations Security Council is set to cut its peacekeeping mission in Lebanon following U.S. pressure
              • Lebanon's lead negotiator for Eurobond restructuring and a key member of the government's negotiating team with the IMF has resigned
            • With Russian opposition leader Alexey Navalny lying in an induced coma just minutes from Angela Merkel's office in Berlin, the German chancellor is at a loss over what to do about Vladimir Putin
              • Russian authorities announced a preliminary probe into the sudden illness of Navalny
              • Russia sold a record amount of floating-rate bonds at its weekly auction as local banks snapped up the securities that protect investors from losses when markets are turbulent
              • Poland is betting on a quick economic recovery next year to reduce the budget deficit from record fiscal loosening to fight the coronavirus crisis
              • The Czech central bank chief expressed rare public criticism of the country's political leadership, saying the plan to cut personal taxes will increase pressure on the budget

              • Belarus jailed two leaders of the largest protests against President Alexander Lukashenko in the country's history, a shift in tactic after police violence against peaceful demonstrators sparked widespread outrage

                • Belarusian ruble hit a record low after protest leaders were jailed
                • The Bank of Israel pointed to the economic drag caused by a government split over the budget and the coronavirus turmoil as threats to a recovery as it kept its crisis-era programs unchanged

                • South Africa may sign a deal to help produce a Covid-19 vaccine, potentially boosting access to immunization on a continent with limited manufacturing capacity

                  • South Africa is still in talks with the World Bank for a loan after rejecting the initial conditions attached to the funds it seeks to borrow
                  • Kenya signed separate agreements with Japan and France to help finance health projects, including a universal care program
                  • Kuwait's government will study an idea to lower by half the ceiling on public debt
                  • Turkey said it wouldn't curtail its offshore explorations as a precondition to restart negotiations with Greece, throwing into question a German-led effort to defuse tensions in the eastern Mediterranean
                    • The EU stepped up threats of more sanctions against Turkey
                    • Hungary's central bank will increase bond purchases under its quantitative-easing plan to help fund a spiraling budget deficit
                    • Bahrain is planning to return to the dollar bond market, according to people familiar with the matter

                    Latin America:

                    • Brazil's President Jair Bolsonaro rejected his economy minister's plan to finance a new social program without additional spending

                      • Economy Minister Paulo Guedes started mulling a series of alternatives to present to the president and one possible solution would be the end of automatic, inflation-based increases to the minimum wage, according to sources
                      • Bolsonaro launched a new housing program to consolidate his popularity among the poor with an estimated cost close to 26 billion reais ($4.7 billion); the president also signed a decree extending benefits for companies for two more months
                      • Brazil's consumer prices rose 0.23% in mid-August from the previous month, led by higher transportation costs; country posted a bigger current-account surplus than expected in July on lower imports and travel abroad
                      • Rio de Janeiro Governor Wilson Witzel was removed from his post amid a corruption probe
                    • Argentina's government requested negotiations with the International Monetary Fund on a new program to replace a record $57 billion agreement from 2018 which failed to lift its crisis-prone economy; it won't seek fresh funding, an IMF representative said
                      • Argentina's official exchange rate is “competitive,” and doesn't need additional devaluation beyond what's currently being done, central bank chief Miguel Pesce said
                      • Companies operating TV, internet and cellular services urged President Alberto Fernandez to reconsider his decree that froze prices on those items through year-end
                      • Argentina will extend lockdown measures until Sept. 20, Fernandez said
                      • Argentina's ruling coalition is seeking to impose a one-time tax on wealthy citizens

                      • Mexico's GDP fell 17.1% in the second quarter compared with the three previous months, remaining on track for its worst recession in nearly a century

                        • Inflation accelerated further beyond the target in early August and the central bank revised down its GDP forecasts
                        • Mexican officials are divided over the scope for further rate cuts as faster inflation spooks some policy makers, according to meeting minutes
                        • Central bank Governor Alejandro Diaz de Leon defended himself against claims by President Andres Manuel Lopez Obrador that a development bank approved a suspicious loan while he was in charge
                        • Peru's Congress approved a bill ordering the state-run retirement fund to make a one-time payment to contributers despite government warnings the measure is unconstitutional
                          • Pension fund managers are warning about a rout in local government bonds and the currency if a second round of early withdrawals from private accounts is approved by congress
                          • Chile's rating outlook was cut to negative by Moody's, reflecting increasing risks to the nation's fiscal strength
                            • The unemployment rate rose more than expected in July in its eighth straight increase
                            • The IMF agreed to lend Ecuador $6.5 billion, enabling the nation to complete a bond restructuring plan and fund its 2020 budget
                            • Venezuela's electoral body again extended a deadline for candidates to register for December's congressional elections as the opposition failed to present choices

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