In This Week’s Issue…

by Alexander Kalis | Managing Partner & Head of Investments at Milltrust International 

Beijing Trade Talks, China A Shares, India’s Oil Dependency, Indonesia’s Inflation War, and Brazil Default Risk.

Mnuchin in Beijing

Treasury Secretary Steven Mnuchin, along with a team of top White House officials, has arrived in China for trade talks, with the ground already set for difficult negotiations. China’s government has said that it won’t accept any pre-conditions from the U.S. or submit to any threats. With Sino-U.S. relations decidedly frosty, fears of an early end to discussions are high.

Passive Investors to Hold China

Investors in passive funds focused on emerging markets will find themselves exposed to China’s volatile stock markets for the first time next month, amid rising economic tensions between the US and China. At the beginning of June, index provider MSCI will for the first time add 222 domestic Chinese stocks, known as A-shares, to its emerging market and global indices, a move seen as a harbinger of growing exposure to China by foreign investors in the coming years.

India’s Oil Dependency

While growth in India is reviving, the macro-economy isn’t looking all that robust. Most worryingly, the rupee is just about the worst-performing currency in Asia this year. The problem is a familiar one: India’s dependence on imported oil. 

Jokowi’s war on inflation puts populism 1st, reform 2nd

Indonesian President Joko Widodo has declared war on inflation, with a series of preemptive strikes designed to woo voters. The potential casualty: His zeal for economic reform.

Brazil Default?

Brazil’s government needs swift congressional action to avoid defaulting on loan guarantees it has made to Venezuela and Mozambique. Legislators must approve the use of up to 1.5 billion reais ($424 million) to honor loans that banks made as part of a policy to finance exports. Brasilia itself is on the hook because Caracas is poised to miss a May 8 deadline for a $275 million debt installment. Wary that legislators may not return to work after Tuesday’s Labor Day holiday, President Michel Temer canceled a trip to Asia this week to supervise the episode his office said could cause “immense damage to Brazil’s economy.”

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