Ashmore Investment Management

The rebound of the Chinese economy, alongside a much less severe winter allowing for a sharp decline in natural gas prices, drove a sharp recovery in European stocks Several European companies are very dependent on China, including the top European car manufacturers and industrial producers, as well as luxury goods US stocks have also rebounded, despite its lower interdependencies with the Chinese economy

The rebound on DM stocks is likely to be just another bear market relief rally, in our view Europe is still in a very complicated position in terms of energy policy, a process likely to last for many years US stocks started the year in extreme oversold territory, and have benefited from an increase in liquidity due to a reduction on the Treasury General Account (TGA) and a large reduction on the Reverse Repo (RR) facility

In the outlook report, we have highlighted that temporary expansions in liquidity conditions have led to a temporary relief rally in US stocks since the beginning of the bear market in Q4 2021 This is a process that should be monitored The US Treasury has been reducing the TGA since mid-2022, compensating for the strong reduction in liquidity from the US Federal Reserve's (Fed’s) security sales (quantitative tightening) Should the US Treasury keep drawing down the TGA due to the current debt ceiling debacle, Figures 1 and 2 would suggest the relief rallies may have more legs

Argentina: Finance Minister Sergio Massa said Argentina will buy back up to USD 1bn in Eurobonds maturing in 2029 and 2030 to improve the debt profile of the country It was not clear whether that amount is notional or face value The prices on the 2030 bonds rose from USD 27c to USD 35c year-to-date and jumped four points following the announcement At current market prices, the country could reduce USD 1bn of outstanding debt with USD 350m or spend USD 1bn to reduce its outstanding debt by USD 2 85bn While the debt reduction is a relatively small amount compared to more than USD 100bn in Eurobonds outstanding, allocating foreign exchange (FX) reserves to debt repurchase makes economic sense as it provides a steep return to reserve assets while lowering the country’s risk premium In economic news, the trade surplus narrowed by USD 0 2bn to USD 1 1bn in December as imports declined by USD 0 75bn to USD 5 0bn and exports slowed by USD 1 0bn to USD 6 1bn

Brazil: The political noise remained elevated last week when President Lula called central bank independence “silliness” in a television interview The context of his comments was again in defence of his own record, saying former central bank chief Henrique Meirelles achieved low inflation and high and inclusive economic growth without formal independence However, the remarks resonated badly in local press Central Bank Governor Roberto Campos Neto is unlikely to abandon his mandate before the end of his term in December 2024, reducing the risk of any government action hurting the institution’s independency in pursuing its inflation target and currency stability goals In economic news, the unemployment rate dropped by 20bps to 8 1% in November, in line with consensus

China: Speaking at the World Economic Forum in Davos, Vice Premier Liu He admitted that the peak of Covid-19 infections and return to economic normalisation came earlier than expected He also said the number of “stalled" property projects across China added up to more than 2,600, impacting around 1 9m people This was the first time China has released such estimates

In economic news, the yoy rate of retail sales improved to -1 8% in December from -5 9% in November, significantly above consensus at -9 0% Industrial production slowed to 1 3% yoy from 2 2% yoy over the same period, also above consensus at 0 1% Real GDP growth was stable at 3 0% yoy in Q4 2022 (0 0% qoq) bringing 2022 calendar year GDP growth to 2 9%, significantly better than consensus at 1 6%

Ecuador: The general budget declined to 1 7% of GDP in 2022 from 4 0% in 2021, consistent with a central government fiscal surplus of 0 6% of GDP The fiscal consolidation means the ratio of debt to GDP is likely to decline below 55% in 2023, a target that was originally set only for 2025 Furthermore, FX reserves rose to USD 8 5bn at the end of 2022, a historic high

Indonesia: Bank Indonesia hiked its policy rate by 25bps to 5 75%, in line with consensus Gross external debt (private and public) dropped by USD 23 1bn until last November to USD 392 6bn, a rate of decline of 7 6% yoy, mostly due to lower public sector external debt The trade surplus declined to USD 2 9bn in December from USD 5 2bn in November, slightly below consensus as imports declined by a yoy rate of 6 6% and exports rose 6 6% yoy

Kazakhstan: The government tightened restrictions for citizens of other Eurasian Economic Union (EAEU) countries to stay in the country without a visa for a maximum of 90 days every three months This means immigrants have to leave for at least 90 days after reaching the visa-free limit Previously, individuals from the EAEU, including Russia, could stay in the country indefinitely The new regulations could make Kazakhstan a less attractive permanent destination in the event that Russia announces another mobilisation

Malaysia: Bank Negara Malaysia (BNM) kept its policy rate unchanged at 2 75%, while consensus expectations were for a 25bps hike The yoy rate of consumer price index (CPI) inflation declined by 20bps to 3 8% in December, 10bps below consensus BNM is one of the most conservative central banks in the world and has a reputation for controlling inflation with much lower volatility on its policy rates The trade surplus increased to MYR 27 8bn in December from MYR 21 2bn in November

Mexico: Retail sales dropped 0 2% mom in November after expanding 0 7% in October, bringing the yoy rate down by 140bps to 2 4% over the same period, slightly better than consensus

Morocco: At Davos, Ali Sedikki, the General Secretary of the Moroccan Agency of Development, made the case in an interview that Morocco will be focusing on new technology, including artificial intelligence Morocco has become a leader in the automotive and aerospace industries, thanks to the robustness of its infrastructure and an abundance of well-trained engineers , helping it to become a technology powerhouse in North Africa 1 Russia: On 19 January, the Bank of Russia started providing RMB overnight swaps, selling RMB for RUB Swap lines are common instruments to provide FX liquidity in periods of heightened volatility, and the possibility of offering RMB without passing by the EUR or USD highlights the progress made in reducing Russia’s dependency on the US and European currencies The CBR swap rates were overnight SHIBOR -250bps for CNY and key rate +100bps for the RUB swap rate The trade surplus surged to USD 282bn in 2022 and the current account surplus rose 180% to 227bn, although the surplus narrowed towards the end of the year owing to lower exports and higher imports

South Africa: The yoy rate of CPI and core CPI inflation declined 10bps to 7 3% and 4 9% respectively, both slightly below consensus Mining output declined 9 0% yoy in November, slightly better than October’s -11 0% yoy, due to energy restrictions and supply chain disruptions Retail sales rose 1 1% mom in November from 0 3% in October, slightly above consensus

South Korea: Exports declined by a yoy rate of 9 8% in the first 20 days of January (after adjusting for business days), as chip exports dropped 24 3% yoy and imports rose 1 9% yoy over the same period The trade deficit widened to USD 6 4bn in the first 20 days From a destination perspective, exports to China dropped 26 6% yoy but exports to the US rose 16 1% yoy In our view, the reopening of the Chinese economy should boost Korean exports over the next few quarters, while exports to the US will slow down on the back of slower economic performance

Turkey: Leader of Nationalist Movement Party (MHP) Devlet Bahceli called on all parliamentary parties to reach a consensus to bring elections forward to May from the original date of 18 June News channel Haberturk reported a proposal, supported by the ruling AK Party President Erdogan suggested the election would be set for 14 May, but the ruling coalition needs votes from the opposition parties to confirm the election date The Central Bank of Turkey kept its one-week policy rate unchanged at 9 0%, in line with consensus

• Bulgaria: The Finance Minister issued EUR 1
• 5bn in 10-year Eurobonds at 4
• 78% yield-to-maturity last week with most of the proceeds destined to repay a EUR 1
• 15bn Eurobond expiring in March
• Colombia: Retail sales (excluding fuel and vehicles) declined 1
• 8% mom in November after a 0
• 9% mom drop last October, bringing the yoy rate down 20bps to 1
• 7%, a large drop from the 8
• 2% yoy peak in August
• The yoy industrial production rate declined 80bps to 2
• 5% in November and the trade deficit narrowed to USD 1
• 1bn in November from USD 1
• 5bn in October, broadly in line with consensus
• Czechia: Producer price index (PPI) inflation declined 1
• 1% mom in December after a 1
• 0% mom drop in November, meaning the yoy rate fell 50bps to 20
• 8% over the same period
• India: Wholesale prices declined 90bps to 4
• 95% in December, 55bps below consensus
• The trade deficit was unchanged at 23
• 8bn in December, in line with consensus
• Nigeria: The yoy rate of CPI inflation rose 30bps to 21
• 8%
• Peru: The unemployment rate in the city of Lima declined to 7
• 1% in December from 7
• 6% in November
• The economic activity proxy rose declined 30bps to 1
• 7% yoy in November, 60bps below consensus
• Philippines: The balance of payments moved to a USD 612m surplus in December after a USD 756m deficit in November
• Poland: The yoy rate of CPI inflation rose 10bps to 11
• 5% in December
• Saudi Arabia: The yoy rate of CPI inflation rose 40bps to 3
• 3% in December
• Taiwan: Real GDP declined by 0
• 9% in yoy terms in Q4 2022 after rising 4
• 0% yoy in Q3 2022, bringing the 2022 growth rate down to 2
• 4%
• The unemployment rate was unchanged at 3
• 6%

Ukrainian Prime Minister Denys Shmyhal said Russia hit nine thermal electric facilities during a recent missile attack The US and its allies did not reach a decision to send German tanks to Ukraine as Russian military has deployed air defence equipment around Moscow to deter drone attacks which have hit the country last week

The European Commission issued a EUR 3bn tranche of the EUR 18bn Macro-financial Assistance package for Ukraine, in the form of a 35-year loan with a 10-year grace period This is aimed at helping the Ukrainian government to pay salaries, pensions and social assistance It reported receiving over EUR 113bn in international assistance since 24 February 2022, including financial, humanitarian and military, with EUR 52bn contributed by the European Union (EU) and EUR 48bn by the US 2