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Capital Markets Monitor: EM Equity and FX Selloff: Crisis? September 2, 2015 - 7:30pm

Seven years after the Great Financial Crisis, the world's equity markets have experienced another bout of sharp sell-offs accompanied by a spike in volatility.  While prices have fallen across the board, the decline in equity and currency values across a range of emerging markets has reached crisis proportions.
This selloff in EM equities and currencies reflects the economic slowdown during the transition from the old commodity and export-driven growth model to one that is more balanced and sustainable.  Until that transition is complete--and different EM countries will progress at different speeds—EM financial assets are likely to remain under pressure.
In this context, even if the Fed were to postpone liftoff in September—an eventuality which market participants increasingly seem to expect—it would provide only short-term relief, especially when price corrections have been excessive. In any event, the deepening monetary divergence between the U.S./UK and the rest of the world is likely to lead to further bouts of volatility in the period ahead.

September 2015 Forecast in Detail September 2, 2015 - 7:05pm

Compared to our July GEM, we have lowered our global growth forecast for both 2015 and 2016 by 0.1pp (Chart 1). This primarily reflects a weaker outlook for EMs (down –0.2 and –0.4pp, respectively). By contrast, mature economy forecasts remained broadly unchanged, as a stronger U.S. growth forecasts offsets weaker projections for both the Euro Area and Japan (Chart 2).

IIF September Global Regulatory Update September 2, 2015 - 5:34pm

This month’s IIF Global Regulatory Update provides updates on current work streams in regulatory capital, liquidity, accounting, disclosure, insurance, systemically important financial institutions, regulatory impact as well as coherence and calibration.

IIF Dispatch: Update from Brazil September 2, 2015 - 5:23pm

BRAZIL: CAUGHT IN A VICIOUS CIRCLE

Below we highlight the main takeaways from our recent trip to Brazil.

IIF Dispatch: Update from Philippines September 2, 2015 - 4:26pm

Philippines might be one of the more resilient Asian countries to the recent turmoil. Yes, Philippines is quite exposed to China risk (we expect exports to continue to contract). However, key growth drivers are domestically driven. Recent GDP readings confirm this trend with growth bouncing back to 5.6% y/y in Q2 from 5% y/y in Q1. We expect growth to remain strong in the second half of the year, coming short of official projections at slightly below 6%.

September 2015 Global Economic Monitor: Storm Out of China September 2, 2015 - 7:28pm

Over the last few weeks, a storm has raged across global financial markets, triggered by rising concern about China’s prospects and policy responses and volatility in the oil market. Recent stress is likely to further accentuate the divergence between emerging market and mature economy performance. We are again marking down our EM growth forecasts and remain concerned about further waves of stress. By contrast, mature economy growth momentum looks firm, as lower oil prices benefit oil-importing countries and lower inflation provides room for continued monetary accommodation. We have pushed back our call for Fed liftoff to Q4.

Draghi's Dashboard: Further Easing In Prospect? September 2, 2015 - 1:21pm

As the ECB prepares for its monetary policy meeting tomorrow, the focus is likely to be on the current turbulence in global financial markets and the slump in commodity prices.

Daily Flows Database September 2, 2015 - 11:51am
GEM and CMM Conference Call & Web Presentation: EMs Under Pressure September 2, 2015 - 8:29am

You are invited to participate in a conference call "Emerging Markets under Pressure – September 2015 Global Macro and Capital Markets Outlook" on the latest developments in the global economy and financial markets. Drawing on our latest Capital Markets Monitor (CMM) and Global Economic Monitor (GEM) publications, Hung Tran (Executive Managing Director) and Charles Collyns (Chief Economist and MD) will discuss the recent escalation of problems in China, the associated global market turmoil, and surrounding risks as well as implications for capital markets and the global outlook. The call will take place on Thursday, September 3 at 8:00 a.m. U.S. Eastern Daylight Time.

Weekly Insight: After the Blowout September 1, 2015 - 1:54am

* Markets find some relief after China turmoil
* Continued EM differentiation under stress
* IIF Tracker shows reversal of EM portfolio flows in August
* China—”two track” monetary easing, more rate cuts ahead
* Ukraine debt restructuring deal—key lesson
* Carbon markets---U.S. sets the stage for Paris

Saudi Arabia: The Peg Will Hold August 27, 2015 - 4:59pm

One year dollar riyal forwards have risen sharply, but the dollar peg will remain intact. However, given large projected deficits, time may be ripe for some consolidation, removal of implicit subsidies, and divestment of state assets to unlock efficiency and economic gains.

Carbon Markets: Renewed Expectations September 1, 2015 - 1:49am

Despite more subdued trading volumes in recent years, carbon markets are likely to increase in number and size as policymakers develop these markets as a key tool for meeting greenhouse gas emissions targets.

IIF Flows Alert: Investors Exit EM Equities in Global Risk-off Move September 1, 2015 - 1:55am

Volatile market conditions have taken a toll on capital flows to emerging markets. Net non-resident portfolio flows in August fell into negative territory for the first time in 2015. EM equity flows bore the brunt of the retrenchment, dropping to their lowest level since the taper tantrum at an estimated -$8.7 billion. *Note: This has been cross-published as "August 2015 EM Portfolio Flows Tracker and Flows Alert."

IIF Dispatch: Update on South Korea August 27, 2015 - 5:13pm

Our recent visit to Seoul found a country struggling to deal with multiple shocks. Korea is a country with one foot in the advanced economy world and one foot still in emerging markets, but seems to suffer from defects of both camps. We have revised down our growth forecast for 2015 and see 2016 growth remaining sluggish.

IIF Dispatch: Update on South Africa August 27, 2015 - 12:34pm

Weak economic data, China-related market turmoil and looming Fed tightening pose a major dilemma for South African policymakers, but we believe authorities will raise rates.

August 2015 EM Portfolio Flows Tracker and Flows Alert September 1, 2015 - 1:48am

Volatile market conditions have taken a toll on capital flows to emerging markets. Net non-resident portfolio flows in August fell into negative territory for the first time in 2015. EM equity flows bore the brunt of the retrenchment, dropping to their lowest level since the taper tantrum at an estimated -$8.7 billion. *Note: This has been cross-published as "IIF Flows Alert: Investors Exit EM Equities in Global Risk-off Move."

Country/Regional Portfolio Flows Data August 27, 2015 - 12:24pm
Portfolio Flows Tracker Data August 27, 2015 - 12:23pm
EM Flows Snapshot: Retrenchment Intensifies September 1, 2015 - 1:26am

Non-resident portfolio flows to emerging markets have turned sharply negative in the last few weeks after a modest recovery in early August. However, so far the retrenchment has been less steep than either the 2013 taper tantrum or the 2008 global financial crisis.

Don't Panic! EM Capital Flows Have Weakened, but NOT Collapsed September 1, 2015 - 1:21am

* There have been recent reports about massive capital outflows from emerging markets.
* We disagree with the underlying estimations and look at a range of measures of capital flows.
* IIF estimates of the same concept and a broader look at capital flows developments do show a recent weakening of EM capital flows but do not suggest an EM rout on a comparable scale to the global financial crisis.