Aaron Saldanha

EMERGING MARKETS-Slip in emerging equities, China data play on investors' minds

14 Jun 2019

* China May industrial output growth slowed to 17-year-plus low

EMERGING MARKETS-Emerging market stocks dip as risk sentiment weakens

13 Jun 2019

* S.African rand firmer, April mining data due later on Thursday

EMERGING MARKETS-Stocks fall as Trump fans U.S.-China trade fears

12 Jun 2019

* MSCI's EM stocks index slips 0.4%; Shanghai Composite down 0.6%

EMERGING MARKETS-Latam FX firm, Mexican peso recovers after Pemex junk-ed by Fitch

08 Jun 2019

(Recasts throughout, updates prices, adds quote, graphic) By Aaron Saldanha June 7 Latin American currencies broadly firmed against the dollar on Friday, with the peso aided by U.S. President Donald Trump's comment that chances were good for an immigration deal with Mexico, a day after Fitch's downgrade of Pemex whacked the currency. The downgrade of the state-owned oil firm's debt to "junk" prompted a further sell-off in the debt-laden company's bonds. Fitch downgraded Mexico's sovereign debt on Wednesday. Trump's optimistic tweet raised the appetite for risk, although the White House was still pushing ahead with its plan to impose import tariffs on its southern neighbor next week. Mexico's peso firmed 0.6%, while MSCI's index of Latin American currencies gained 0.4%. Yields on local 10-year bonds slid a little more than 8 basis points from Thursday's highs, which were recorded in the wake of the Pemex downgrade. Stocks on the Mexican benchmark eked out a 0.1% rise. Despite one-month peso implied volatility rising to near its highest level of 2019 and some investors fearing Moody's could also downgrade Pemex, others see value in company's debt relative to the Mexican sovereign. "In hard currency, the (yield) spread to sovereign is attractive in our view, especially in the long end of the curve i.e. above 15 years. We believe the default scenario is remote," said Marcelo Assalin, head of emerging market debt at NN Investment Partners. Assalin said Pemex's credit worthiness for peso-denominated debt "is actually higher than in dollars, particularly given the weak peso," noting the about 340 basis-point spread of Pemex's peso debt to the Mexican sovereign's. Brazil's real firmed 0.2% against a weak dollar, while stocks rose 0.6%, aided by gains among consumer discretionary and energy stocks. Petroleo Brasileiro SA (Petrobras) common shares and preferred shares gained 2.2% and 1.6%, respectively, helped by a 2.8% rise in Brent crude futures . The state-controlled oil firm's chief executive said Thursday's ruling by Brazil's Supreme Court that state-run firms do not need congressional approval to sell their units was "very important and a victory for the country". Colombia's peso strengthened 0.7%, while stocks rose 1.4%. Energy firm Ecopetrol SA traded 3.6% higher. The state-run company said it will launch a new phase of cost cuts aimed at saving 8 trillion Colombian pesos ($2.45 billion), with the bulk of the savings in exploration and production. Latin American stock indexes and currencies at 1859 GMT Stock indexes Daily % Latest change MSCI Emerging Markets 1,007.23 0.45 MSCI LatAm 2,738.35 0.95 Brazil Bovespa 97,753.14 0.56 Mexico IPC 43,210.31 0.14 Chile IPSA 4,966.59 0.8 Argentina MerVal 35,667.93 -0.18 Colombia IGBC 12,245.65 1.4 Currencies Daily % Latest change Brazil real 3.8688 0.34 Mexico peso 19.5798 0.53 Chile peso 691.8 0.06 Colombia peso 3,263.18 0.78 Peru sol 3.327 0.27 Argentina peso (interbank) 44.8500 0.18 ($1 = 3,263.1800 Colombian pesos) (Reporting by Aaron Saldanha in Bengaluru Editing by Sonya Hepinstall)

European stocks clock best weekly showing in two months, French shares shine

07 Jun 2019

European stocks posted their best weekly performance since early April on Friday, aided by strong gains in Paris, against a backdrop of hope among investors that central banks would support global growth with more accommodative policies.

EMERGING MARKETS-Latam FX firms, Mexican peso hit by a slew of rating actions

07 Jun 2019

(Recasts throughout, updates prices, adds fund manager's quote) By Aaron Saldanha June 6 Most Latin American currencies firmed against the dollar on Thursday, with Mexico's peso proving the exception to the norm a day after ratings agency Fitch cut its debt rating on the country and peer Moody's lowered its outlook. Fitch downgraded Mexico's rating, citing risks including those posed by debt-laden state-owned oil firm Pemex, whose financial issues the agency said were exacting a toll on the prospects for Latin America's No.2 economy. "The recognition that Mexico, the sovereign, is overrated at A3 and BBB+ should not be a surprise given the policy uncertainty under the current regime, and more specifically, the more explicit support that the sovereign will likely give Pemex," said Cathy Hepworth, PGIM Fixed Income's co-head of emerging markets debt, after the downgrade. After lowering its outlook on Mexico on Wednesday, Moody's did the same on Pemex on Thursday. The peso softened 0.3%, while yields on local Mexican 10-year bonds rose about 4 basis points to 8.03%. The yield spread between those bonds and their U.S. peers widened on Wednesday, creeping toward a more than 4-1/2 month peak hit on Monday. "There is a perception that there will be a lot of forced selling if Pemex is downgraded; this may not happen. We think many crossover investors may already be positioned for a post-downgrade sell-off, and some could be waiting for a downgrade to buy Pemex," said Cathy Hepworth of PGIM Fixed Income, which manages $776 billion in assets. Mexican stocks slid 0.6%, largely on losses among financials and consumer staples, while MSCI's Latin American stocks index rose 0.5% on the back of gains among shares in index heavyweight Brazil. Shares on Sao Paulo's bourse added 1.3% on broad-based gains, as the benchmark recovered most of the ground lost in Wednesday's 1.4% slide. Brazil's real marginally firmed. Common shares and preferred shares of state-run oil firm Petroleo Brasileiro SA (Petrobras) rose 2.1% and 2%, respectively, helped by a 1.9% rise in Brent crude futures. Electric utility Eletrobras rose 2.3%, as it received the green light to start a hydroelectric plant it is the largest shareholder in. Vale SA, a minority owner, rose 0.9%. Argentina's peso firmed 0.5%, while stocks tacked on 0.9%. Colombia's peso strengthened 0.4%, aided by firmer oil futures. Chile's peso firmed modestly. Latin American stock indexes and currencies at 1902 GMT Stock indexes daily % Latest change MSCI Emerging Markets 1003.04 -0.16 MSCI LatAm 2715.38 0.54 Brazil Bovespa 97198.42 1.25 Mexico IPC 43158.51 -0.6 Chile IPSA 4924.61 -0.66 Argentina MerVal 35577.75 0.86 Colombia IGBC 12029.01 0.06 Currencies daily % change Latest Brazil real 3.8780 0.42 Mexico peso 19.6480 -0.38 Chile peso 692.2 0.09 Colombia peso 3288.48 0.46 Peru sol 3.336 0.12 Argentina peso (interbank) 44.9050 0.06 (Reporting by Aaron Saldanha in Bengaluru Editing by Sonya Hepinstall)

Investors react to double whammy of Mexico downgrade

07 Jun 2019

MEXICO CITY Investors said on Thursday that the downgrade for Mexico's sovereign was overdue, given the ample risks posed by heavily indebted state oil company Pemex and recent trade tensions with the United States.

INSTANT VIEW-Investors react to double whammy of Mexico downgrade

06 Jun 2019

By Stefanie Eschenbacher and Aaron Saldanha MEXICO CITY, June 6 Investors said on Thursday that the downgrade for Mexico's sovereign was overdue, given the ample risks posed by heavily indebted state oil company Pemex and recent trade tensions with the United States. Credit ratings agency Fitch downgraded the nation's sovereign debt rating late on Wednesday while Moody's lowered its outlook to negative. CATHY HEPWORTH, CO-HEAD OF EMERGING MARKETS DEBT AT PGIM FIXED INCOME "The recognition that Mexico, the sovereign, is overrated at A3 and BBB+ should not be a surprise given the policy uncertainty under the current regime, and more specifically, the more explicit support that the sovereign will likely give Pemex." "There may be a more formal recognition that in analyzing Mexico, one needs to consider the combined picture. This could mean that Pemex remains investment grade." ABBAS AMELI-RENANI, PORTFOLIO MANAGER, GLOBAL EMERGING MARKETS, AT AMUNDI "The outlook change from Moody's was more expected than the rating cut from Fitch. We expect Mexico's ratings to stabilize at BBB for the rest of the year before further pressure arises in 2020 as the policymaking framework deteriorates." "The sovereign's approach towards Pemex has been inconsistent under the new administration and a turnaround strategy is still missing." "The most supportive policy from the government would be tax breaks that would allow Pemex to become cash flow positive in the long run. We are yet to see meaningful signs of that materializing." SHAMAILA KHAN, DIRECTOR OF EMERGING MARKET DEBT STRATEGIES AT ALLIANCEBERNSTEIN "Mexico sovereign downgrade has less of an impact directly on sovereign bonds as spreads already reflect credit deterioration. However, it is probable that the sovereign downgrades lead to junk status for Pemex debt in the near term and that is the greater risk." AARON GIFFORD, EMERGING MARKETS SOVEREIGN ANALYST, FIXED INCOME DIVISION, AT T. ROWE PRICE "Mexico has been in the eye of the storm with policy uncertainty domestically, a flare-up in trade and immigration tensions with the U.S., lower oil prices, and general risk-off." "At times like these, Mexico needs to tread lightly. Unfortunately, the government has chosen a path that many investors view as unsustainable." "For the sovereign, it doesn't mean much as it's still safely investment grade. However, it does put downward pressure on ratings for cooperates on the brink of losing investment grade, including Pemex." GORKY URQUIETA, GLOBAL CO-HEAD OF EMERGING MARKET DEBT AT NEUBERGER BERMAN "It's no surprise and largely, if not fully, priced in. The market has been anticipating a fiscal deterioration, mostly related to Pemex large funding requirements dragging down the sovereign's balance sheet." "The Mexican sovereign trades like it has a BBB- credit already. However, the silver lining is this at the margin could make (Mexican President Andres Manuel Lopez Obrador) rethink his approach to dealing with Pemex and oil reforms at large." JAMES BARRINEAU, HEAD OF EMERGING MARKETS DEBT RELATIVE, SCHRODERS "For Mexico, the downgrades will not come as a surprise to investors. The so far muted reaction of the currency seems to reflect that." "Although growth is slow as long as fiscal discipline is maintained we do not see Mexico at risk of further downgrades that would imply a risk of losing investment grade status." LUIS GONZALI, PORTFOLIO MANAGER, FRANKLIN TEMPLETON INVESTMENTS "Even if this is not good news, the decisions of both ratings agencies were widely expected, considering how Mexican sovereign bonds and credit default swaps have traded in recent months." "It is positive that Fitch has changed the outlook from negative to stable, which eliminates de possibility that there will be another downgrade in the short term." (Reporting by Stefanie Eschenbacher in Mexico City and Aaron Saldanha in Bengaluru; Editing by Lisa Shumaker)

Euro zone stocks hit by firm euro as Draghi shoos away hopeful doves

06 Jun 2019

Euro zone shares underperformed their broader European peers on Thursday, hit by a stronger euro after the European Central Bank matched investors' expectations in keeping rates untouched but refrained from providing as dovish an outlook as hoped.

EMERGING MARKETS-Most Latam currencies weaken, Brazil's real hit by data

06 Jun 2019

(Recasts, updates prices, adds graphic, quote by fund manager) By Aaron Saldanha June 5 Most Latin American currencies fell on Wednesday, with Brazil's real dipping on weak local data, while Mexico's peso bucked the trend on optimism over a deal to avert U.S. tariffs on Mexican goods. MSCI's Latin American stocks index dropped 0.7%, while its index of Latin American currencies fell as Brazil's real weakened 0.6% despite a weak dollar. Economic activity in Brazil shrank in May, IHS Markit's monthly purchasing managers index surveys showed, raising the risk the economy could be back in recession. Sao Paulo-traded equities fell 1%, weighed by losses across the board. Common shares and preferred shares of Petroleo Brasileiro SA (Petrobras) fell 0.4% and 0.6%, respectively, less than the 2.2% drop in Brent crude futures . The state-run oil firm expects to narrowly win a supreme court decision that would allow it to proceed with asset sales, according to two company sources involved in the case, freeing up billions of dollars. Vale SA fell 1.7%. The chief executive of Brazil's largest pension fund, Previ, told Reuters it will seek a gradual sale of Vale shares. Through a holding company, Previ and other state firms' pension funds collectively own about 20% of the mining giant, whose shares dived in January following a deadly dam burst. Banco do Brasil slid 2.1%. Chief Executive Rubem Novaes said there is "worry" about a potential bankruptcy filing by Odebrecht SA, adding the construction conglomerate owes the bank about 9 billion reais ($2.32 billion). Mexico's peso strengthened 0.2%, as hope grew for a deal to avoid the United States imposing tariffs on Mexican goods in return for Mexico doing more to halt illegal immigration. Stocks in Mexico ticked up 0.1%, as gains among industrials were almost negated by losses among financials, while yields on local, 10-year bonds fell 4 basis points to 7.96%. "In spite of the recent noise of tariffs in Mexico, I don't really consider Mexico to be a higher risk local bond market," Cathy Hepworth, co-head of the emerging markets debt team at PGIM Fixed Income, told Reuters. "From a valuation perspective, local bonds in Mexico look okay." Colombia's peso softened 0.5%, weighed on by lower oil futures, while Chile's peso dipped on soft copper prices. Argentina's peso weakened 0.5%, with data showing industrial output for April tumbled 8.8% year on year. Weaker-than-expected U.S. private jobs data increased expectations the U.S. Federal Reserve will trim dollar borrowing costs this year, broadly denting the greenback against the global currencies. Latin American stock indexes and currencies at 1900 GMT Stock indexes Daily % Latest change MSCI Emerging Markets 1,004.08 -0.13 MSCI LatAm 2,706.26 -0.72 Brazil Bovespa 96,365.21 -1.04 Mexico IPC 43,301.55 0.14 Chile IPSA 4,960.32 -0.9 Argentina MerVal 35,185.25 1.4 Colombia IGBC 12,056.90 -0.83 Currencies Daily % Latest change Brazil real 3.8808 -0.63 Mexico peso 19.5235 0.19 Chile peso 693.3 -0.06 Colombia peso 3,304.5 -0.43 Peru sol 3.34 0.24 Argentina peso (interbank) 44.9000 -0.40 ($1 = 3.8763 reais) (Reporting by Aaron Saldanha in Bengaluru)

World News

"Sea of black" Hong Kong protesters demand leader step down

Hundreds of thousands of people clogged the streets in central Hong Kong on Sunday dressed in black to demand the city's leader step down, a day after she suspended an extradition bill in a dramatic retreat following the most violent protests in decades.