It was a weaker month for EM fixed income and currency markets. Rising inflation pushed up US Treasury yields before they reversed course after news broke of the Omicron COVID variant, with similar sharp shifts happening across financial markets.
Egypt responded to concerns over further dollar bond issuance by securing external funding, including US$3 billion in bank loans to fund ESG projects. In Kenya, tourism has been slowly improving, remittances are at record levels, and the economy has rebounded strongly as lockdowns have eased.
Most of the region continues to embrace a ‘living with the virus’ approach to COVID-19, but China, Hong Kong and Taiwan continue to adopt a zero-tolerance approach. Inflation has risen slightly in the region but remains relatively benign. High vaccination rates have lifted Singapore’s growth outlook.
Central banks in the region continue to react to inflation, but it may be close to peaking in some countries. Investors welcomed election results in Chile and Argentina, but the appointment of a relatively unknown candidate as central bank governor in Mexico weighed on sentiment.
Central and Eastern Europe
Poland, Hungary and the Czech Republic all aggressively hiked interest rates during the month. Poland’s national bank surprised the market with a bigger-than-expected rate rise, leading to a sell-off in the country’s local currency bonds.
Rest of Europe, Middle East and Africa (EMEA)
The Turkish central bank announced a further interest rate cut, causing the lira to sell off. Elsewhere, tensions between Russia and neighbouring Ukraine intensified during the month, and Omicron variant news weighed on South African assets.