Switcheroo (Market Wrap- June 21st)

Coverage: Saudi Arabia, Turkey, UAE, Egypt, Nigeria and South Africa

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Author: Kunal Damle

A mixed week comes to an end with most of the stock markets at multi-year highs but with mounting concerns coming in from multiple fronts, it doesn’t seem like it is going to get any easy.

With the FOMC out of the way, most emerging markets heaved a sigh of relief that the rate increase rhetoric is more subdued than one expected. We expect one rate rise before the end of this year, but more subdued increases going into 2016. With commodity prices having come off and inflation under control, the risk to USD will weigh on the Fed’s mind than anything else.

Most emerging markets (EM) saw the dovish stance of the Fed as a breather to rally on. Both the Nifty and Sensex in India rallied with even monsoon looking like being normal. In Turkey, as we postulated last week, we are bullish primarily because valuations are extremely attractive in our coverage universe; 12-month forward valuations show Price-to-Book at 1.33x and Price-to-Earnings at 10.59x. South Africa closed up 1.86% on the back of a strengthening Rand.

valuations

Source: Bloomberg

Closer to our region, last week marked the beginning of the Holy Month of Ramadan. Markets have historically tended to be very light on volumes and with Ramadan coming in during the summer months would put even more pressure on the markets. The Saudi Markets opened to foreign investment last week, which as we expected was a very tepid event. Look forward to Saudi markets seeing more profit taking with no triggers in place. We see markets being flat, low on volumes till mid – July.

The coming week look far murkier with Grexit now looking imminent. Emerging markets looking ripe for an downward correction while look to USD strength against most EM FX.

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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No Monkey Business (Market Wrap- May 31st)

Coverage: Saudi Arabia, Turkey, UAE, Egypt, Nigeria and South Africa 

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Author: Tanya Rawat

“Now I’m the king of the swingers, the jungle V.I.P,
I reached the top and had to stop” starts the beginning verse of the catchy Jungle Book track “I wan’na be like yo…” made immortal by Louis Prima.

In the same rambunctious flavour, expect the markets to show chutzpah this week with Turkey getting the party started with pre-partying already reaching crescendo in the latter end of May (USD terms); the Borsa Istanbul 100 Index lost ~9.30% as polls conducted by trusted agencies showed the AKP (viewed by many as pro-market) losing ground to opposition. Ahead of the June 7th elections, expect the downward slide to continue with Benchmark 2Y bond yields at close to 1Y highs at 9.85% and 5Y CDS at 220 bps. Additionally, Turkey equity markets have a strong negative correlation with the US 10Y Tsy yields which are creeping up to 1Y highs on strong economic data from the US.

The S&P looks stronger, the VIX at 13 levels, Dollar strengthening expected as US 10Y Tsy yields expected to rise further as the economic makeup improves in the US. Expect Gold to be flattish around $1200 per ounce till the June 5th deadline for Greece to make debt payments to IMF (a key catalyst).

As per my call last week, GCC markets broke first levels of support with the Dubai Financial Market (DFM) breaching the 4K level (AED terms), Saudi failing to continue its upward momentum. This week though markets look more resilient on Saudi opening mid-month via passive flows and I expect them to be range-bound with no major catalyst and Egypt to looking equally sedate.

While I expect Naira to fare in the median in the pool of African currencies, I expect the Rand to continue its slide on continued Dollar strengthening. This is hurting the JALSH Index akin to other emerging market indices.

“Ooh-bi-doo, I wan’na be like you
I want to walk like you, talk like you, too
You see it’s true, an ape like me
Can learn to be like you, too”

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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Winner Winner Chicken Dinner (Market Wrap- May 24th)

Coverage: Saudi Arabia, Turkey, UAE, Egypt, Nigeria and South Africa 

'You're not taking this seriously, are you?

Author: Tanya Rawat

“Winner Winner Chicken Dinner”! The origin of the term lies in Las Vegas where a chicken dinner used to cost less than $2.00 and the usual bet at that time was $2.00, so when you won you had enough for the chicken dinner. Hence “Winner,winner, chicken dinner”! 

The week opens with a Risk-On mood as the S&P closed off a third consecutive week of gains, the VIX at year lows of 12.13, dollar regaining strength (Dollar Index at 96 levels), US 10Y Tsy at 2.20 levels after bottoming out last month at 1.80 and Gold falling by 1.40% to $1203 per ounce. While Yellen remains supportive of a 2015 rate hike, a June rate rise is nearly off the table.

This hawkish tone from her is bound to affect Turkey adversely as the past week has been negative for it,  as it braces for the upcoming Parliamentary elections in the first week of June. Additionally, Dollar strength is bound to exacerbate its hurt further. Month-to-date the index’s mood has been dictated by the strengthening of the Lira versus the Dollar.

Expect the GCC markets to be spooked by the suicide bombing in KSA and new found dollar strength (negatively affects real estate and tourism sectors).We expect some passive allocation to UAE and Qatar on the MSCI rebalancing happening on the 29th May. Another major event to watch for, is the KSA market opening on the 15th June with the QFI regulations out, an event every market participant would be watching out for.

Egypt is set to continue its euphoria of buying into the market on the back of cancelled Capital Gains Tax. In South Africa, it’s a busy week with quarter-on-quarter (q-o-q) GDP numbers, unemployment data and trade balance numbers in as the Rand teeters and totters in the 11.80-12 range. On 29th May, as Nigeria (Africa’s largest oil exporter) looks to welcome president-elect Muhammadu Buhari in office, the Naira and the stock index have firmed considerably reflecting their confidence in him.

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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