What Our Analysts Are Reading – 11/16/2018

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Each week Frontier Strategy Group’s global team shares their view on key media stories, and what the implications are for businesses that operate in emerging markets. For more information about how to contact our analysts, send us an email.

Danyi YangDanyi Yang on “Chinese Banks: We’ll Never Grow Up, Not Us

“China recently instructed banks to extend half of their new lending to private companies within three years to boost private sector growth. However, major commercial banks, burdened with high levels of low-return SOE debts, are unlikely to cut strong ties with state-owned companies. Private companies in China will still have to rely heavily on shadow banking and other forms of risky financing.

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Alejandro Valerio on “Banxico increases its policy rate

“Banxico has increased its policy rate to 8% amid inflationary pressures and Mexican peso volatility generated after the president-elect López Obrador (AMLO) decided to shut down the new international airport on October 29. This latest hike was expected by the market, in alignment with the FED policy increases, high inflation, and concerns about AMLO’s policy shifts.

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Josef Jelinek on “At Summit, China Finds Multiplayer Trade Deals Don’t Come Easy”

“There had been some hopes that a 16-nation trade pact, known as the Regional Comprehensive Economic Partnership, or RCEP, might be agreed at this week’s ASEAN summit in Singapore. China wanted a deal, which would help to portray Beijing as a defender of multilateralism and free trade. However it was unable to overcome objections to the deal by other countries like India.

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athanasia-kokkinogeniAthanasia Kokkinogeni on “Brexit: European Commission intensifies preparedness work and outlines contingency action plan in the event of a no deal scenario with the UK

“Despite the clear progress in Brexit negotiations in line with FSG’s expectations, the EU hasn’t ratified the transitional deal, and Westminster hasn’t approved it, meaning that No Deal Brexit remains a distinct possibility. The European Commission published today guidelines, navigating businesses through the event of No Deal Brexit. MNCs should continue to work on their contingency plans.

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Pratima SinghPratima Singh on “RBI, Center Inch Closer to Resolving Differences Ahead of Board Meeting

“The level of reserves maintained by the central bank and tight restrictions on lending remain two areas of contention between India’s central bank (the RBI) and the government. The RBI is attempting to strengthen the financial sector, while the government is focused on increasing short-term stimulus in the economy. Improper handling of the situation may reduce investor confidence in the country.

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Matthew KindingerMatthew Kindinger on “Restrictions on the hiring of state employees will continue

“The Mozambican government will extend its freeze on public sector hiring to 2019. The decision will mean opportunities for consumer-facing MNCs will likely remain weak for the coming year, because civil servants account for a large portion of formal employment.

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Alex Schober on “Argentina’s monthly inflation in October was 5.4% and it has increased 39.5% YTD

“FSG expects October to be the final month of spiked inflation data associated with the pass-through effect of this year’s peso crises. However, in light of this data, FSG will increase its end of year inflation forecast to 47% and average 2018 inflation number to 34%.

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