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After their worst quarter of the year, emerging-market assets head into the final three months of the year facing a set of issues that are just as likely to be obstacles as triggers to a recovery.
The following are responses from 54 investors, strategists and traders across the globe to five questions with potential bearing on developing-nation assets. The survey was conducted between September 19 and 30.
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Investors see the PBOC's one-year medium lending facility rate, paid by commercial banks borrowing medium-term facilities from the central bank, to be trimmed to 3.1% by year-end from 3.3% currently, based on an average of 19 respondents. And the required reserve ratio for major banks, or the share of funds lenders must hold in reserve, will be reduced to 12% from 13%, according to the average of 25 respondents.
4. Key Brazil reform
Will Brazil pass the final vote on the pension bill before the year-end?
Three-quarters of the survey participants expect Brazil's pension-reform bill to be approved this year, seen as a key move toward fiscal discipline in Latin America's largest economy. Upside to Brazilian bonds may be limited given the powerful rally they have seen in recent quarters, however, analysts say. Central bank rate cuts have also already boosted Brazilian debt.
5. US rate assumption
With US rates having a strong bearing on emerging-market assets, is the 10-year Treasury yield more likely to rise above 2.4% or fall below 1.4% by the end of 2019?
Over three-quarters of survey participants expect the benchmark to end the year lower than 1.57% as of 8:45 a.m. in Singapore, possibly below 1.40%. The yield has dropped more than a percentage point this year.
Emerging-market debt has been a beneficiary of lower US rates - in particular, dollar-denominated bonds. The hard-currency debt has outperformed local-currency bonds so far this year, in part due to a strengthening dollar.