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All good comes to those who wait in India
Weekly investor research
30 October 2017
Bank recapitalisation in India is a big deal for both growth and prospects of further access to the Indian bond market. By contrast, the news from South Africa is miserable as the fiscal anchor loosens. China’s first Dollar-denominated bond since 2004 should have priced inside US Treasuries based on relative fundamentals, in our view. Brazil’s parliament dismissed charges against President Michel Temer and attention now shifts to pension reform. The FX commission steps up Dollar auctions in Mexico. Venezuela takes steps to pay 2020 bonds. South Korean growth picks up strongly on exports. Indonesia puts forward a prudent 2018 Budget. Argentina hiked 150bps as the economy picks up against a backdrop of still stubbornly high inflation. Uhuru’s mandate in Kenya has a whiff of illegitimacy about it. The threat of Nigeria’s excommunication from the MSCI Frontier declines. In the global backdrop the USD and UST swoons extended further, but should run out of steam before too long due to valuations and positioning and investors should use this opportunity to add to Emerging Markets (EM) longs, especially in local currency bonds and stocks. Draghi was dovish and the Catalonia issue remains unresolved.