MSCI Inc, the world’s largest index provider, warned on Tuesday that the MSCI Argentina Index could be removed from the MSCI Emerging Markets Index should it become harder for foreign investors to access its stock market.
According to the estimates of the International Monetary Fund (IMF), the Uruguayan economy will decrease by 3% this 2020. The “great closure” has been how the international body has defined, as the title of its World Economic Outlook, government measures against the global pandemic caused by the COVID-19.
The International Monetary Fund sees the world economy suffering its worst recession since the Great Depression this year, with emerging markets and low-income nations in Africa, Latin America and Asia at particularly high risk.
Emerging markets face more downgrades than upgrades this year as foreign debt levels leave them vulnerable to rising U.S. interest rates and the strength of the dollar, according to Fitch Ratings. Latin America, the Middle East and Africa will be impacted more by lower credit scores because of the high share of their foreign-currency debt, said James McCormack, Hong Kong-based global head of the sovereign and supranational group at Fitch.
Brazilian stocks index, Bovespa, rose nearly 2% on Friday ahead of this weekend's presidential election, whole Brazil's Real further consolidated. The MSCI's index of emerging market stocks in the region gained 1.24%. Although, the region's markets fared better than emerging markets elsewhere, they were on track to end a five-week winning streak.
Argentina’s Peso fell on Thursday, pressured by the recession-hit country’s dismal inflation outlook and higher U.S. interest rates that have pushed capital away from riskier emerging markets and toward the greenback, local traders said. The peso shed 1.85% to close at 38.4 per dollar after having gained 9.58% over the previous three days under a freshly-renegotiated International Monetary Fund financing deal that calls for tougher fiscal and monetary policy measures.
The Brazilian currency Real fell to a 31-month low versus the U.S. dollar on Thursday on jitters ahead of the country’s October election. Jitters across emerging markets caused by a stronger U.S. dollar and exacerbated by the unfolding currency crisis in Turkey already took a toll on the Brazilian unit before this week.
Advanced economies, including the United States, must avoid pulling back stimulus too quickly given the weak global economic recovery and recent market volatility highlights key risks in some emerging markets, the International Monetary Fund said on Wednesday.
Monetary policy tightening in advanced economies will cause volatility in international markets this year and impact the monetary situation of some emerging economies, IMF Managing Director Christine Lagarde cautioned on Wednesday.
India and Brazil have the highest government debt ratios at almost 70% of GDP among top ten emerging market economies, according to a report by Deutsche Bank.