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EM High Yield tops the 2015 score sheet; Summary of the main events of the past two weeks

Weekly investor research

04 January 2016

Emerging Markets (EM) High Yield hard currency sovereign and corporate debt indices top bond returns in 2015. IMF reform heralds better representation of EM in global financial matters. Saudi Arabia changes tack on fiscal policy. Venezuela’s President Maduro attempts to use his majority in the Supreme Court to try to dismantle the opposition’s super-majority in the National Assembly. Ukraine passes a critical fiscal reform bill in order to comply with the IMF Stand-by Agreement. Mexico’s steady economic expansion continues. China achieved its target for swapping local government loans into bonds in 2015 and looks set to continue in 2016. Turkey’s Central Bank leaves rates unchanged despite inflation remaining far higher than the target. Brazil’s current account deficit was a full USD 2bn smaller than FDI inflows in November. In the global backdrop, the collapse in the Chicago PMI and a sharp downwards revision to expected growth in Q4 2015 raises important questions about the health of the US economy going into 2016. In Europe, nationalism continues to infect economic policy as Scandinavian countries re-impose border controls for the first time in 50 years in yet another indication how developed economies continue to favour populist short-term measures over effective meaningful reforms.

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