Morning Commentary: EM investors watch Fed, Syria, Turkey, oil prices; Yingde Gases eyed

By Christine Van Dusen

Atlanta, Dec. 14 – Emerging markets investors on Wednesday awaited the Federal Open Market Committee’s rate decision, largely expecting – and pricing in – a 25 basis point hike.

“The key question is whether today’s event could provide another boost to the reflation trade triggered by the Trump election victory, or whether it is really too early to say what’s at stake,” a London-based analyst said. “Consensus seems to be the latter case, with potentially modest changes toward a more optimist outlook for the economy on the back of recent data.”

But in Wednesday’s statement, Federal Reserve chairman Janet Yellen could “reiterate that accelerated fiscal spending would come hand in hand with adjustments in monetary policy,” he said.

For emerging markets assets, that would provide some relief, he said.

“The risks lie in a more hawkish statement,” he said. That, he said, “could cause another wave of selling pressure across the yield curve.”

Overall, investors were in wait-and-see mode, a trader said.

Meanwhile, oil prices were under some pressure as market-watchers speculated that producers in the United States could increase production.

“Rigs count growth in the U.S. will be a bearish factor for price growth,” according to a report from Schildershoven Finance BV.

Also on Wednesday, Hong Kong-based Yingde Gases Group Co. Ltd. received some attention amid a corporate conflict between shareholders over who should maintain control of the company.

Two directors issued an open letter to shareholders, proposing changes to the board and to solicit offers for shares, Schildershoven said in a report.

“Yingde Gases’ corporate conflict between current and new shareholders may also hurt its business process, which will negatively impact the company’s credit quality,” the report said. “We recommend investors take profit in company’s bonds to wait out the conflict.”

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