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Currencies in emerging markets have been on a losing streak since the beginning of 2024, falling towards their worst start to the year since 2020 as they face pressure from a stronger-than-expected USD and carry traders fleeing Latin American markets, writes the Financial Times.
By the numbers: JPMorgan’s index for currencies in emerging markets has dipped 4.4% in 2024 — a dip more than double the size of their decline over the past three years.
Carry trade investors have been stepping back from some of the larger emerging markets: Despite investor appetite growing in the beginning of the year for the carry trade in emerging markets, local interest rate uncertainty and elections spooking the markets have destroyed much of the gains made. This is particularly true in Latin America, where the MXN has fallen nearly 10% against the greenback after Mexico’s election of Claudia Sheinbaum spooked the markets and other currencies in the region followed suit.
Thankfully, the carry trade is alive and well in some smaller emerging markets — including Egypt: Some carry trade investors have been ditching larger emerging markets and are instead focusing on local currency bonds from smaller countries working their way out of economic difficulties with high interest rates like Egypt and Nigeria, the salmon-colored paper writes.
But don’t forget about the big USD elephant in the room: With the DXY index showing the USD up 4.4% since the start of the year against six of its main trading partner’s currencies in addition to traders cutting expectations of six or seven interest rate cuts this year to just two, EM currencies have become much less attractive. “A bit more than half of EM weakness has been about dollar strength,” explained Abrdn’s EM portfolio manager Kieran Curtis.
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TASI |
11,499 |
-1.3% (YTD: -3.9%) |
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MSCI Tadawul 30 |
1,438 |
-1.3% (YTD: -7.3%) |
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NomuC |
26,754 |
+0.4% (YTD: +9.1%) |
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USD : SAR (SAMA) |
USD 3.75 Sell |
USD 3.75 Buy |
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Interest rates |
6% repo |
5.5% reverse repo |
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EGX30 |
26,418 |
+1.1% (YTD: +6.1%) |
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ADX |
9,013 |
+0.7% (YTD: -5.9%) |
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DFM |
4,012 |
+0.6% (YTD: -1.2%) |
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S&P 500 |
5,465 |
-0.2% (YTD: +14.6%) |
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FTSE 100 |
8,238 |
-0.4% (YTD: +6.5%) |
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Euro Stoxx 50 |
4,907 |
-0.8% (YTD: +8.5%) |
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Brent crude |
USD 85.24 |
-0.6% |
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Natural gas (Nymex) |
USD 2.71 |
-1.3% |
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Gold |
USD 2,331.20 |
-1.6% |
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BTC |
USD 64,303 |
+0.4% (YTD: +53.0%) |
THE CLOSING BELL: TADAWUL-
The TASI fell 1.3% on the last close before the Eid break on turnover of SAR 11 bn. The index is down 3.9% YTD.
In the green: Rasan (+30.0%), Talco (+14.4%) and MIS (+7.2%).
In the red: Smasco (-8.5%), Acwa Power (-5.3%) and Miahona (-5.2%).
THE CLOSING BELL: NOMU-
The NomuC rose 0.4% on the last close before the Eid break on turnover of SAR 29 mn. The index is up 9.1% YTD.
In the green: Burgerizzr (+11.4%), AZM (+5.7%) and Jahez (+4.9%).
In the red: Ladun (-8.2%), Osool and Bakheet (-5.8%) and Pro Medex (-5.7%)
CORPORATE ACTIONS-
#1- Shareholders of Tadawul-listed Modern Mills have approved the board’s recommendation to distribute SAR 81.8 mn in dividends at SAR 1 per share for FY 2023, it said in a regulatory filing (pdf). Eligible shareholders will be able to cash in starting Sunday, 7 July.
#2- The board of Tadawul-listed Sahara International Petrochemical has approved a dividend of SAR 362.6 mn at SAR 0.50 per share for 1H 2024, it said in a disclosure to Tadawul. The distribution date is set for Thursday, 11 July.
