{"id":36004,"date":"2018-07-17T08:23:49","date_gmt":"2018-07-17T13:23:49","guid":{"rendered":"http:\/\/olduvai.ca\/?p=36004"},"modified":"2018-07-17T08:23:49","modified_gmt":"2018-07-17T13:23:49","slug":"canary-in-the-coal-mine-emerging-market-contagion","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=36004","title":{"rendered":"Canary in the Coal-MIne–Emerging Market Contagion"},"content":{"rendered":"
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CANARY IN THE COAL-MINE \u2013 EMERGING MARKET CONTAGION<\/a><\/h3>\n<\/div>\n<\/header>\n
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  • Emerging market currencies, bonds and stocks have weakened<\/li>\n
  • Fears about the impact of US tariffs have been felt here most clearly<\/li>\n
  • The risk to Europe and Japan is significant<\/li>\n
  • Turkey may be the key market to watch<\/li>\n<\/ul>\n

    As US interest rates continue to normalise and US tariffs begin to bite, a number of emerging markets (EM\u2019s) have come under pressure. Of course, the largest market to exhibit signs of stress is China, the MSCI China Index is down 7% since mid-June, whilst the RMB has also weakened against the US$ by more than 6% since its April low. Will contagion spread to developed markets and, if so, which country might be the \u2018carrier\u2019?<\/p>\n

    To begin to answer these questions we need to investigate this year\u2019s casualties. Argentina is an obvious candidate. Other troubled countries include Brazil, Egypt and Turkey. In each case, government debt has exacerbated instability, as each country\u2019s currency came under pressure. Other measures of instability include budget and trade deficits.<\/p>\n

    In an effort to narrow the breadth of this Macro Letter, I will confine my analysis to those countries with twin government and current account deficits. In the table which follow, the countries are sorted by percentage of world GDP. The colour coding reflects the latest MSCI categorisation; yellow, denotes a fully-fledged EM, white, equals a standard EM, green, is on the secondary list and blue is reserved for those countries which are so \u2018frontier\u2019 in nature as not to be currently assessed by MSCI: \u2013<\/p>\n

    \"EM<\/p>\n

    Source: Trading Economics,\u00a0Investing.com<\/span>, IMF, World Bank<\/em><\/p>\n

    For the purposes of this analysis, the larger the EM as a percentage of world GDP and the higher its investment rating, the more likely it is to act as a catalyst for contagion. Whilst this is a simplistic approach, it represents a useful the starting point.<\/p>\n

    \u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    CANARY IN THE COAL-MINE \u2013 EMERGING MARKET CONTAGION Emerging market currencies, bonds and stocks have weakened Fears about the impact of US tariffs have been felt here most clearly The risk to Europe and Japan is significant Turkey may be the key market to watch As US interest rates continue to normalise and US tariffs […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[7380,14105,1992,1732,431,9937,805,4311,9670],"class_list":["post-36004","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cobden-centre","tag-colin-lloyd","tag-contagion","tag-emerging-markets","tag-interest-rates","tag-tariffs","tag-trade","tag-trade-wars","tag-us-interest-rates"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36004","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=36004"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36004\/revisions"}],"predecessor-version":[{"id":36005,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/36004\/revisions\/36005"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=36004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=36004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=36004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}