EM Review: Spread of Coronavirus Beyond China Sapped Risk Taking

(Bloomberg) -- Emerging-market currencies had their worst week since August last week and stocks fell on mounting evidence that the coronavirus outbreak is taking a toll on corporate earnings and the global economy. The dollar surged and most developing-nation currencies weakened, led by Brazil’s real and South Korea’s won. Turkey and Indonesia cut interest rates, while Egypt kept borrowing costs on hold.

Following is a roundup of emerging-markets news and highlights for the week ending Feb. 23.

Read here our emerging-market weekly preview, and listen here to our weekly podcast.

Highlights:

Asia’s biggest economies are already feeling the brunt of the coronavirus shock. Key gauges for manufacturing in Australia and Japan fell while early export orders for South Korea showed a slump in Chinese demandSouth Korea’s early trade data suggested the outbreak has started to disrupt the region’s supply chainsIndonesia’s Finance Minister Sri Mulyani Indrawati called for a coordinated global response to the virus outbreak. In an interview with Bloomberg TV, she warned that policy makers may be underestimating its impact on trade and economic growthChina provided medium-term funding to banks and cut the interest rate it charges for the money as officials seek to cushion the economy from the virus spreadChina’s banks lowered the one-year loan prime rate, the benchmark for new corporate and household loans, to 4.05% from 4.15%Country is said to be considering measures such as direct cash infusions and mergers to bail out the airline industryA growing number of China’s private companies have cut wages, delayed paychecks or stopped paying staff completelyHSBC Holdings Plc and Royal Dutch Shell Plc are sending staff home in Hong Kong and Singapore after contact with people infectedChina’s central bank set its daily yuan fixing weaker than 7 per dollar for the first time in almost two months on WednesdayNew coronavirus cases reported by Hubei province dropped sharply after China changed the way it officially reports the numbers for the second time in a monthChina is considering delaying its most high-profile annual political meeting for the first time in decadesThe head of a Wuhan hospital said a turning point has been reached, but the outlook was more cautionary outside of ChinaJapan reported two more fatalities from the virus, who were on the cruise ship off Yokohama, while South Korea recorded its first confirmed death. South Korea said it will raise the infectious disease alert to the highest level “red”NOTE: Everything China Is Doing to Support Its Virus-Hit MarketsREAD: Apple Won’t Meet Quarterly Revenue Target Due to Coronavirus Click here for coronavirus updateChina is said to be considering making some purchases of U.S. agricultural goods by early March as a way to show it’s still committed to its phase-one trade dealPresident Donald Trump has intervened to stop his own administration’s developing plans to block sales of General Electric-made jet engines to China and other proposed restrictions on American exportsGovernments across the world are starting to use more fiscal firepower to boost economies, though the shift may not be happening fast enough to appease central bankers who say they’re sick of carrying the burden of stimulus aloneThe coronavirus outbreak presents another reason for nations with fiscal surpluses to boost their spending and support the global economy, the head of the Organisation for Economic Cooperation and Development saidFinance chiefs and central bankers from the world’s largest economies say they see downside risks to global growth persisting as the coronavirus raises uncertainty and disrupts supply chainsIndonesia’s central bank cut its benchmark interest rate to 4.75% from 5% after a three-month pause as the spread of the coronavirus threatens growth in Southeast Asia’s biggest economyThe monetary authority lowered its 2020 economic growth forecast to 5%-5.4% from 5.1%-5.5% rangeIndia is open to greater market access for American farm and dairy products and lower duties on Harley-Davidson Inc. motorcycles as it seeks to conclude a trade deal with the U.S. in time for Trump’s scheduled visit this month, according to people with knowledge of the matterTurkey’s central bank cut interest rates again, delivering the smallest decrease of its seven-month easing cycle but still risking a backlash as investor tolerance of lower borrowing costs starts to waneLebanon was downgraded by two rating firms, each cutting the country to 10 steps below investment grade and saying a default was almost inevitable; Moody’s cut the grade by two steps to Ca, the second-lowest non-default score, and S&P reduced the rating to CC from CCCLebanon’s $1.2 billion Eurobonds due on March 9 fell to a record low of 54 cents on Wednesday, sending the annualized yield to 1,600%​The country is said to be investigating the sale of Eurobonds by local banks to foreign investors including Ashmore Group PlcArgentina’s debt load is “unsustainable” and private creditors would need to make a “meaningful contribution” for the country to regain its footing, the International Monetary Fund saidIMF won’t offer a haircut on its Argentina loan, Managing Director Kristalina Georgieva saidArgentine Economy Minister Martin Guzman and Georgieva had a “fruitful exchange” in Saudi Arabia on Saturday during the G-20 meetings, according to the IMF. Argentina will allow the IMF to conduct an Article IV review, a preliminary step that could eventually allow for a new program with the Washington lenderMalaysian politics is set for another shakeup, but with a familiar script: Prime Minister Mahathir Mohamad refusing to hand power to Anwar Ibrahim

Asia:

Market chatter that China’s central bank is planning to adjust property-loan quotas in its macro prudential assessment is untrue, according to a statement from the People’s Bank of ChinaChina’s economy is likely to pick up quickly after the coronavirus is contained and stage a “V-shaped” recovery, according to a senior official with the nation’s central bankChina plans to take over indebted conglomerate HNA Group Co. and sell off its airline assetsThe country will delay the trial trading of interest-rate options to March 23 due to the coronavirus epidemic, National Interbank Funding Center saidSouth Korea’s Foreign Minister Kang Kyung-wha said Japan should take faster measures to lift export curbs on key semiconductor componentsPresident Moon Jae-in called for “extraordinary” steps to minimize the impact of the coronavirus on South Korea’s economyThe government will provide an emergency loan program for budget airline carriers which have been hit by falling demand following the novel coronavirus outbreak, Yonhap News said, citing Finance Minister Hong Nam-kiIndonesia’s exports decreased in January just as the coronavirus began spreading, with Finance Minister Sri Mulyani Indrawati warning of a hit to global tradePresident Joko Widodo’s approval rating has climbed early in his second term, with the majority of the voters satisfied with the performance of his top ministers, according to a surveyThailand lowered its growth outlook for this year as its tourism-reliant economy takes a knock from the spread of the coronavirus. Growth is seen in a range of 1.5%-2.5%, down from a previous projection of 2.7%-3.7%The Bank of Thailand next month will review its 2020 economic growth forecast, currently estimated at 2.8%, as the coronavirus outbreak hurts tourism and may affect supply chains, Governor Veerathai Santiprabhob said. Separately, Veerathai declined to comment on whether a rate cut in February was enoughMinutes from the latest Bank of Thailand meeting show that it’s mulling more steps to spur outflows. The monetary policy committee remained “concerned that the baht might not be consistent with economic fundamentals,” according to the minutesInvestment of 400 billion baht ($13 billion) is expected to be injected into the economy once the fiscal year 2020 budget bill comes into effect, the Budget Bureau’s Director-General Dechapiwat Na Songkhla saidIndia is considering closer scrutiny of foreign direct investment in sectors crucial to national security, a top government official saidThe Reserve Bank of India on Feb. 17 got bids worth 1.9 trillion rupees ($27 billion), eight times more than the 250 billion rupees it offered banks in three-year money. The second issuance on offer for a similar amount on Feb. 24 will have a one-year tenorFilipinos overseas sent home $30.1 billion in 2019, up 4.1% from a year ago the central bank said in a statementThe Philippines will allow citizens employed in Hong Kong and Macau to return to their jobs, partially lifting a ban imposed earlier this month to prevent the spread of the novel coronavirusThe nation posted a balance of payments deficit of $1.36 billion in January, reversal from $1.57 billion surplus in DecemberTaiwan said the outbreak of coronavirus to reduce export orders by $3 billion-$3.5 billion in February as data showed orders fell 12.8% on year in January, more than median estimate of 6.7% declineCurrent-account surplus widened to $17 billion in the fourth quarter from revised $13 billion in third quarter

EMEA:

Dubai will take its port operator private after a dozen years to alleviate its debt burden and avoid a repeat of the economic crisis that forced a bailout in 2009Nasdaq Dubai is about to lose its most valuable stock after DP World Ltd. announced plans to go privateSouth Africa’s rising country risk is putting upward pressure on interest rates, even as inflation expectations decline, with credit-rating companies contributing to the negative sentiment, according to the central bankMoody’s Investors Service could cut its rating for South Africa if the nation can’t rein in spending, boost growth and improve tax compliance to stabilize its debt ratios, said Lucie Villa, the firm’s lead sovereign analyst for South AfricaThe nation’s inflation rate rose to a seven-month high in January driven by higher fuel prices; consumer-price growth quickened to 4.5% from 4% in DecemberThe chief restructuring officer of South Africa’s power utility Eskom Holdings has “virtually” completed his report on options for its finances, and it should be released by the end of the month, Chief Executive Officer Andre de Ruyter saidZambia was downgraded one level to CCC by S&P Global RatingsThe Bank of Zambia held its key rate at 11.5%, even as inflation accelerated for a 10th straight month, to allow a November increase to filter through to the economyPlunging oil prices led the International Monetary Fund to cut its estimate for Nigerian economic growth, highlighting the difficulties Africa’s top crude producer faces in reviving and diversifying its economyInflation quickened to a 21-month high in January as food shortages caused by border closures continued to drive up the price of staples. Consumer prices rose 12.1% from a year earlier, compared with 12% in DecemberZimbabwe’s central bank maintained its key rate at 35% and said it sees annual inflation dropping to 50% by the end of the year from around 500%; its currency is plunging on the black market, causing chaos in the equity marketEgypt held its base rate at 12.25% on Thursday, in line with what most economists expectedThe government chose Deutsche Bank, Citigroup, HSBC and Credit Agricole to arrange its first international sale of green bonds; the issuance is expected to happen by the end of JuneTurkey issued its harshest warning yet to Russia in the standoff over Syria’s last rebel stronghold, where their battle for control threatens to destroy a fragile understanding that’s kept a refugee crisis from exploding at full forceTurkey has asked the U.S. to deploy two Patriot missile-defense batteries on its southern border to free it to punish any future attacks by Russian-backed Syrian troops, according to a senior Turkish official in AnkaraThe Turkish side has suffered several casualties in Libya, President Recep Tayyip Erdogan said, in what could be Turkey’s first direct losses since intervening in the war on behalf of the internationally recognized Libyan governmentA state-owned development bank in Belarus is planning a return to international debt markets in a test of investor appetite toward exotic securitiesDemand for Serbian dinar bonds reached a record as the government extended maturity on its borrowing ahead of the expected inclusion of some of its notes in a key bond indexThe U.S. sanctioned a unit of Russia’s largest oil producer, Rosneft PJSC, for maintaining ties with Venezuela’s Nicolas Maduro and state-run oil company PDVSAHungary’s interbank rates climbed further and the central bank continued to cut liquidity injected into the economy on Feb. 17, after a top policy maker signaled efforts to rein in accelerating inflation

Latin America:

Brazil’s central bank cut reserve requirements on time deposits to 25% from 31%, freeing up some 49 billion reais ($11 billion) into the financial systemInflation eased slightly more than expected in mid-February on the back of a drop in food and beverage costsREAD: Brazil Government Resists Bid to Make Central Bank Target GrowthCurrent account deficit widened to $11.9 billion in January versus $5.7 billion gap previouslyArgentina is loosening its grip on the peso, as the currency weakened against the dollar in the first half of February -- more than any full month since the controls were further tightenedCentral bank cut the key rate floor -- the minimum level that rates are allowed to fall -- to 40% from 44%Argentina sold 3.6 billion pesos ($58 million) in local currency-denominated notes, known as Lebads, and 9 billion pesos in floating-rate Badlar bonds, according to a statement from the Economy MinistryEconomic activity dropped 0.3% y/y in DecemberMexico will hold investor meetings to debut its SDG Sovereign Bond Framework, which would be used to issue green euro-denominated debtThe murder rate fell in the first month of the year as President Andres Manuel Lopez Obrador pledges to improve security amid protests over recent brutal killings of womenPeru’s economic expansion lost steam in the fourth quarter as infrastructure delays hit the construction industry

--With assistance from Colleen Goko, Selcuk Gokoluk, Carolina Wilson and Paul Wallace.

To contact Bloomberg News staff for this story: Yumi Teso in Bangkok at yteso1@bloomberg.net;Netty Ismail in Dubai at nismail3@bloomberg.net;Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, ;Carolina Wilson at cwilson166@bloomberg.net, Karl Lester M. Yap

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