News
LT: Positive – Sept retail trade growth increases to 20.9% yoy (p2)
UA: Mixed – Sept C/A deficit YTD reaches USD 5.5bn, FDI remains high / IMF arrives in Ukraine this week (p2)
Today’s Events
BG: Sept PPI / CR: Sept IP, Aug Wages / HU: Sept Unemployment / KZ: KZT 13bn 2018 GB auction / LT: 3Q GDP (prelim) / LV: Sept Retail trade / RU: Money supply as of 24 Oct, CBR policy rates announcement / SK: Sept PPI , Oct Consumer and Ind Confidence / SL: Oct CPI, Sept Retail trade
EEMEA Markets
Different financing conditions for different countries: Thursday saw the Polish sovereign follow up on Turkey’s strategy of last week, namely taking advantage of improved market conditions to issue USD2bn. With EU structural inflows of only EUR40mn in September, this should help bolster the MinFin’s FX account and help them replenish some of their recent losses. In contrast, yesterday saw Hungary scrap a 12 month t-bill auction as bids were just above half of the HUF40bn that the AKK offered. As we discussed in our weekly this week, the sovereign faces a large external financing requirement which is more frontloaded than even Ukraine’s, making undisturbed access to both domestic and external markets is necessary to secure sufficient funding.
Focusing on CIS, weekly FX reserve data for Russia shows a weekly reserve loss of USD 3.6bn, higher than last week’s USD 1.8bn but still well below weekly losses of USD 6-8bn towards the end of September. RUB has also clawed back some of its losses over the past two weeks. The last couple of months have provided plenty of evidence of a continued lack of domestic confidence in currencies in CIS. External developments can quickly hit domestic sentiment. That said, with the exception of Belarus, there appears to be little appetite for further FX losses from here in the region. In part this reflects elevated oil prices and economic activity, which is holding up well. From meetings in Kazakhstan this week, the authorities reiterated that they would need to see RUB lose a further 25% against USD to depreciate KZT. On a positive note, end September seems to have represented the weakest point and while outflows continue, they have slowed since.
Specially in Ukraine, the IMF arrived this week. Given hefty gross external financing requirements next year and a ‘fear to float’ UAH amongst the domestic authorities, it is our expectation that they will reach an agreement with the IMF. But negotiations could well prove lengthy given that the IMF has not been there in some time, the government is relucatant to hike gas prices, a downgrading of growth forecasts for next year means that further fiscal measures have to be taken while there are also political issues at play. Some newsflow by end next week is possible. Also very possible is that the IMF makes any disbursement contingent on passage of a reasonable 2012 budget, i.e. disbursement will only occur once the budget is passed by parliament.
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Gillian Edgeworth
UniCredit Research