Market background
November was a very strong month for risk assets. Investor sentiment was boosted by the lower-than-expected consumer price index (CPI) inflation print in the US, and the resultant drop in US Treasury yields provided a further boost to EM bond markets.
Africa
Coinciding with an IMF visit to the country, Ghana has launched a debt restructuring process, starting with local debt. Angola’s minister of finance said the country does not need new IMF financing and instead is likely to tap into international financial institutions to fund budget spending and projects.
Asia
The main positive drivers of markets in the region included the significant easing of US financial conditions post the lower US inflation print, optimism regarding China’s COVID policy, and increasing support for China’s real estate sector.
Latin America
Given the region’s close ties with the US, bond markets benefitted from the apparent Fed pivot following the lower-than-expected US CPI inflation print. Within the region, Brazil’s inflation data was more mixed following several months of disinflation, while Chile’s inflation print was lower than expected.
Central and Eastern Europe
The inflationary outlook for the region improved modestly over the month, with inflation in the Czech Republic, Romania and Poland falling in year-on-year terms. Hungary remains a weak link given the ongoing large twin deficit and the continuing rule-of-law dispute with the EU.
Rest of Europe, Middle East and Africa (EMEA)
Turkey’s economy continues to face headwinds of incredibly high inflation and a large current account deficit on the back of higher energy prices. Ukraine’s government has entered an agreement with the IMF which could evolve into a full IMF support programme in 2023.
EM corporate debt highlights
Like other risk assets, November was very strong for EM corporate debt returns. The overall asset class was lifted by two key themes; improved risk sentiment post the lower-than-expected US CPI print, and optimism around China’s change in stance on its COVID policy.
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