EM wrap-up:   Ruble, TL slave to politics, EM recovery in doubt

The year started with surprises for Emerging Markets.  Politics of authoritarian leaders like, Putin and Erdogan are undermining investor sentiment.  A strong dollar, still expected to be transitory is slapping risk appetite hard. But, the biggest problem is even in China  recovery is lackadaisical, while Covid-19 is simply not retreating in face of a slow vaccination campaign, throwing out new variants each week to stage counterattacks.  1Q2021 may be lost for Developing Nations.


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Russia’s ruble led losses in emerging-market currencies on Monday as oil prices plummeted, while most stocks fell further from record highs as a spike in global coronavirus cases curbed appetite for risk-driven assets.


The ruble RUB= sank about 1.1%, coming under pressure as the possibility of new COVID-19 lockdowns across the globe hurt the crude market.


The detention of prominent Kremlin critic Alexei Navalny over the weekend drew ire from several U.S. allies, raising the possibility of a political clash with the west and further pressuring Russian assets.


Most other emerging-market currencies in Europe, the Middle East and Africa retreated as spiking COVID-19 cases in China and the United States hit sentiment. Positive gross domestic product data from China did little to revive hopes, as it pointed to an uneven economic recovery across the globe.


The wheels are coming off the lira’s best start to a year since 2012 after President Recep Tayyip Erdogan rekindled doubts over the direction of Turkey’s monetary policy.


The currency had appreciated more than 1% against the dollar this year — adding to a 14% rally in the last two months of 2020 — before Erdogan on Friday repeated his long-held belief that high interest rates fuel inflation. Since then, it has weakened almost 2%, the worst performance out of 24 major emerging-market currencies, and options traders have turned the most bearish on the currency since November.

The turnaround suggests some investors may be losing faith in what’s amounted to a change of stance in Turkey. Erdogan’s comments are his first criticism of economic management since November, when Naci Agbal was appointed central bank chief and pledged to follow a more orthodox policy approach to help stem a slide in the lira. Agbal has overseen a cumulative 675 basis-point increase in Turkey’s benchmark interest rate since taking over as governor, commented Bloomberg on TL.


Contrary to the triumphalist reading of the press, China’s 2020 GDP growth data were very problematic. While we all focus on the headline growth number, it is important to recognize that the Chinese economy in almost every important structural way has done the opposite of what Beijing has wanted it to do.

  • 2.3 percent GDP growth came on the back of a significant contraction in consumption and business investment. It was only the 2.9 percent increase in fixed-asset investment and, above all, the 7.0 percent increase in property development, made possible by a 25-percentage-point increase in the debt-to-GDP ratio, that allowed Beijing to achieve the politically necessary growth targets, commented Global Source Partners China team.


A growing coronavirus second wave is threatening to overwhelm fragile healthcare systems across Africa after months of relatively mild impact across the continent, officials have warned.

Authorities in Nigeria, Senegal, Sudan, South Africa and the Democratic Republic of Congo, as well as international organizations, say hospital capacity and oxygen supplies are running out as the continent-wide death rate this month surpassed the global average for the first time.


“It is very severe,” Dr John Nkengasong, head of the AU’s Africa Centres for Disease Control, told reporters last week. He appealed to African leaders to subsidise masks because “for now [they] are the best vaccines that we have”, wrote FT.





Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.