25 June - 01 July 2016

From the CEO OF EMIS

Living in the UK, it is easy to get caught up in the ongoing political fallout from the country’s decision to leave the European Union. There is a strange fascination in seeing political careers unexpectedly wrecked and the very existence of once-powerful parties threatened. So it comes as some relief that my job involves looking at markets where Brexit is an issue but not the dominant one.

Emerging market currencies naturally came under immediate pressure last week as investors sought refuge in developed currencies. But as the initial shock dissipated, we saw a rebound in EM currencies and assets. Now it seems certain that a consequence of Brexit will be a further delay to US Fed rate rises. This is massively helpful to the prospects of emerging markets where so much debt is denominated in US Dollars. As I mentioned in previous weeks, the long-term impact on emerging markets from Brexit will be patchy. Eastern Europe remains at greatest risk while Latin American and Asian economies are relatively immune and may even benefit.

Clearly, the notion that developed markets represent safety and emerging markets equate to risk needs reassessment. Supposedly perilous emerging markets must be looking on in bemusement as the world’s fifth largest economy has its credit rating downgraded, its politics dissolve into chaos and its people split down the middle in terms of its future direction. Dutch Prime Minister Paul Rutte said this week that the UK had ‘collapsed politically, monetarily, constitutionally and economically’. At this juncture, it is hard to disagree with him.

POLAND’S CONTRIBUTIONS TO EU TO GO UP BY EUR 500 MN – MEDIA

Poland’s contributions to the budget of the European Union would increase by EUR 500 million due to the UK’s withdrawal from the block.

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BREXIT WILL HAVE A LIMITED IMPACT ON LATAM

According to data published in a report by JP Morgan, Latam is not at the epicentre of the shock given limited trade links with the UK exports.

BREXIT WON´T BRING IMMEDIATE RISK TO ASIA-PACIFIC SOVEREIGNS

Economists at Morgan Stanley said Indian and Philippine economies are the least exposed to the impacts of Brexit in Asia.

M&A activity in South Africa was low in the first quarter of 2016, with only several deals above USD 100mn. The local economy is set to grow by only 0.6% in 2016, and the overall outlook seems uncertain due to droughts, high inflation and political unrest.

TURKEY AUTOMOTIVE: YEAR OF RECORDS

The production of passenger cars and commercial vehicles in Turkey rose by 16% y/y to an all-time high of 1.36 million units and exports of motor vehicles also surpassed one million units in 2015.

MEXICO TOURISM: MEXICO IS ALWAYS A GOOD IDEA

Mexico was the world’s 10th most visited country in 2014, receiving a record high 29.3mn international visitors, up 21.1% y/y, and ranked 22nd in terms of international tourism receipts .

a Philippine property market veteran opined that the Brexit could boost the business process outsourcing (BPO) industry.

As Britain voted to leave the EU, news and think tank coverage from China has touched on a possible domino effect.

In his 15-minute inaugural speech, he cited corruption, criminality, and the sale of illegal drugs as the most pressing issues faced by the country.

Italian company Piaggio, the producer of the famous Vespa scooters, announced that it will start exporting two brands of the group to Brazil by year-end.

Panama inaugurated on Sunday a $5.4 billion expansion of its shipping canal, after a long-year delay, overrun in costs and amid uncertain outlook of the shipping industry.

The Canadian firm Caisse de depot et placement du Quebec (CDPQ), in association with the consortium CKD, will invest USD 1.83bn in Mexico’s energy sector.

The Polish national currency, the zloty, has weakened on Friday morning as the UK voted to exit the European Union, PAP Market Insider reported.

Turkey may call a referendum on whether to continue or not its bid for European Union membership, if the accession process stagnates.

The Czech Government expects that country’s transfers from the European Union under the financial framework 2014-2020 will decline by 107 billion crowns.

Kenya and Ethiopia have signed a deal to build together a $2.1 billion crude oil pipeline, which will run from Ethiopia’s capital Addis Ababa to Lamu.

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The Central Bank of Sri Lanka indicated in a report to Prime Minister Ranil Wickremesinghe that it believes Sri Lanka’s economy will be affected by Britain’s exit from the EU.

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South Africa-based gold producers and Gold Fields would benefit from the UK decision to leave the European Union, CEEMarketWatch - Daily News reported.

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