Lukashenko says he may quit as president
Belarus hits EU with tit-for-tat sanctions
Belarusian police introduce colour-coded torture system for detained protesters
Kremlin publicly condemns Belarusian police brutality in hint of growing frustration with Lukashenko
Russian services PMI rises to 48.2, but remains underwater as recovery continues to slow
Russia to start mass vaccinations on December 7
Azerbaijan’s Aliyev calls on Armenia, Russia, Turkey and Iran to assist in creating Nakhchivan land corridor
FPRI BMB Russia: Sberbank releases a three-year transformation strategy to e-commerce concern
Ukraine’s banking sector continues recovery, but profits still lagging last year
Ukraine’s real wages up over 10% in October but have been stagnant in dollar terms for almost a year
FPRI BMB Ukraine: Public has confused opinions on resolving the Donbas conflict
Western Balkans plus Ukraine subsidised coal with over €900mn in 2018-2019
Estonian parcel robot firm Cleveron eyes €30mn state loan
Estonia’s chief auditor says €1bn in state COVID-19 loans issued haphazardly
Economic sentiment in CEE falls in November as recovery momentum splutters
Estonian animation studio Imepilt to hold IPO
Brighter days ahead: The economic bounce back in 2021
Central, Southeast Europe stock markets jump in anticipation of COVID-free future
VISEGRAD BLOG: An easing of trade tensions but still an uncertain situation for export-oriented Central Europe
Hungary's PM risks isolation as Poland mulls dropping EU budget veto
Poland ready to back down from veto of EU budget
Hungary's ruling party in damage control mode after MEP sex scandal bombshell
Poland’s PMI remains stuck just above the improvement line at 50.8 in November
Czech companies dominate this year’s Deloitte Technology Fast 50 CE
Coronacrisis to get worse before it gets better forecasts wiiw
EU diplomats say no chance of Bulgaria removing veto for Skopje to start EU accession talks
IMF says downside risks to Albanian economy are increasing
EU ministers fail to agree on launch of accession talks with Albania and North Macedonia
Western Balkans commit to green agenda and regional common market at Sofia summit
Bosnia’s opposition ousts nationalist parties in major cities
Bosnia’s main ethnic parties fight to hold onto power in local elections
Southeast Europe’s EU members to get biggest boost from next budget and recovery funds
Bulgaria imposes 3-week lockdown to slow down COVID-19 spread
CEE politicians highlight trade and security ties as they congratulate Biden
Breakaway Transnistria fully under Sheriff’s control as Obnovlenie party sweeps board in parliament election
Moldova’s presidential election is over, now the battle for the parliament begins
Moldova’s foreign policy reset
Russian establishment quick to congratulate Moldova's new president-elect
Rising COVID-19 cases put intense pressure on CEE healthcare systems
MEPs urge European Commission to act against Hungarian media financing in North Macedonia and Slovenia
North Macedonia mulls decriminalising cannabis to boost tourism
Retail surpass pre-crisis peak as Romanians shop instead of holiday
Romania’s stability election
Romanian venture capital firm Catalyst launches new €40mn-50mn fund for TMT
Serbia to tighten restrictions further as coronavirus cases reach new peaks
Slovenian PM Jansa stands alongside Hungary and Poland in EU rule of law row
BEYOND THE BOSPORUS: Turkish number crunchers deliver November inflation surprise of 14%
Erdogan needs to go says analyst assessing Turkey’s economic collapse
Ukraine strikes deal with Turkey to produce killer drones instrumental in Karabakh conflict
In Karabakh deal, as many questions as answers
Protesters flood Yerevan demanding Armenia’s “traitor” PM quit over Nagorno-Karabakh surrender
Who emerge as the real winners from the bloody Nagorno-Karabakh conflict?
Below average 2020 wine production destined for volatile and uncertain global market
Iran calls on Saudis to limit $67bn defence spending to Tehran’s $10bn
Iranian prosecutors pledge to pursue Trump for Soleimani killing even after he leaves White House
No reaction from Kazakh elites as bombshell FT report says Nazarbayev’s son in law siphoned millions from pipeline scheme
UK court freezes $5bn in assets connected to fugitive Kazakh banker Ablyazov
Attack of the Debt Tsunami: global debt soars to a new all-time high
Kyrgyzstan's proposed new constitution provokes widespread revulsion
Kyrgyzstan's China debt: Between crowdfunding and austerity
CFC joins RWC in assessing KAZ Minerals buyout offer as under-valuation
China business briefing: Not happy with Kyrgyzstan
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
Mongolia’s wrestling culture: From the grasslands to the cage
No surprises in Tajikistan as Rahmon retains presidency with 91% of vote
A Tajikistan poised on verge of economic calamity set for vote
Tajikistan revives on-off dispute with Iran
Turkmenistan: The dammed united
Turkmenistan: Everybody yurts, sometimes
Dirty money investigation reviews identified payments worth $1.4bn linked to Turkmenistan
Uzbekistan unveils extensive privatisation programme
Download the pdf version
The global economic recovery continued throughout the quarter, and the OECD now expects world GDP for 2020 to contract by only 4.5%, compared with 6% in their previous forecast from June.
The key reason for the improvement is the unprecedented stimulus, both fiscal and monetary, that has supported household incomes and kept companies alive.
Global indices gained broadly during Q3, with MSCI Emerging Markets up 9.6%, MSCI Frontier Markets 8.3% and MSCI World 7.9%. Their year-to-date figures now show surprisingly few signs of the recent turmoil, and MSCI World is up 1.7%, while MSCI Emerging Markets is down only 1.2%. MSCI Frontier Markets lags however, down 8.8%.
Headline figures rarely give the full picture, though, and going into the details and reading the management reports of our strategies over the quarter reveals interesting diverging trends.
On the economic and stock market front, what stands out is China. Already during Q2, when most countries saw their GDPs contract at a record pace, China posted a 3.2% gain and was the only G20 country showing growth. Since then, numbers have continued to improve, with strong real estate and auto sales as examples, with China successfully controlling the pandemic and managing to restart its economy.
Its success in shifting the economy from a mainly export-driven to a domestic consumption and investment-driven model, with important implications for the country’s ability to deal with the US’ harsher stance on trade and technology, is a recipe for its resilience towards weaker global demand.
For the rest of emerging markets, and especially those outside Asia, the impact has been harder and the recovery weaker. Many countries in Africa and Latin America will likely need longer to return to pre-coronavirus (COVID-19) levels, partly as they have not had the full ability to use fiscal stimuli due to weaker public balance sheets.
South Africa, for example, is anticipated to contract by 11.5% this year and grow by only 1.5% next year. Also under pressure is Turkey. The weak global environment, combined with geopolitical conflicts and policy errors, has put Turkey’s FX in a downward trend which creates a significant risk for inflation running out of control.
In Europe, the frontier and emerging countries of the region have not been able to escape the dire environment, but in Eastern Europe we anticipate a much faster recovery than in Western Europe. Many of these countries have far less public debt and remain an important part of the EU supply chains, with both affordable and skilled labour and a productive manufacturing sector thanks to huge past investments. This makes them well positioned for the nearshoring we expect to happen when global trade picks up. They are also expected to see a steady inflow of both EU recovery and cohesion funds, equivalent to up to 35% of GDP in some countries, which will allow for structural growth for years to come.
Looking at equity markets, it is clear that growth stocks have massively outperformed value stocks, and tech-related, including “digital leaders”, have outperformed traditional sectors and companies. This is equally true for both emerging markets and developed markets.
Among the regions we invest in, Asian countries with strong footprints in the technological sector rank among the best markets this year. Central European and Balkan countries on the other hand, with more traditional and banking-heavy sector compositions, have unsurprisingly shown much weaker returns.
It is important, however, to note that their lagging returns do not necessarily reflect deteriorating trends in underlying fundamentals, just a low investor appetite for value stocks. We expect the latter to change once the pandemic is under control, which should hopefully happen next year. The outlook for these equity markets therefore remains attractive.
When it comes to emerging market tech stocks, these followed the global trend. Chinese e-commerce giant Alibaba gained 36% during the quarter, while leading Russian tech company Yandex was up 30%. The latter also announced that it was in talks to acquire online bank Tinkoff, up 31% during the period, paving the way for an entry into fintech. In Poland, we saw the record-breaking IPO of Allegro, a “local Amazon” with 36% domestic market share, which attracted massive demand and a post-market valuation of $11bn.
When it comes to geopolitics, uncertainty remains high. Relations between the US and China have not improved, and both had a consulate of the other country closed.
In Eastern Europe, the poisoning of Russian opposition leader Alexei Navalny resulted in the EU hardening its stance on the country. We also saw a dubious presidential election in Belarus, which led to massive and still ongoing protests in the country, as well as a flare-up of violence between Armenia and Azerbaijan in the disputed area of Nagorno-Karabakh; two events that raised fears of Russian involvement.
While all this is a clear negative for sentiment, the impact on markets is likely limited, as we expect any sanctions stemming from these to be aimed at individuals rather than the financial systems or corporates.
Finally, we have the US election coming up in November. There, at this stage, the key worry is on the electoral process rather than the outcome, and any narrow result risks being contested. In terms of election outcome, a Biden win will likely help risk premiums come down and act as a support for global markets, while a Trump win might be the preferred choice for the US domestic economy, thanks to his more lenient policies on tax and regulation.
Looking ahead, a stronger-than-expected recovery has supported sentiment and markets, but the pace of improvement has slowed, and uncertainty on the future recovery has increased. In the US, a lack of new stimulus, combined with a potentially turbulent election process, poses a key risk, and tensions with China are likely to endure.
In the EU, a rising number of COVID-19 cases has dented sentiment, and leading indicators now imply a contraction in the service sector. Despite this, we see a limited risk of a broad correction thanks to all the measures taken by governments and central banks throughout the year, as well as better knowledge on the virus. The abundance of liquidity also remains in place, as does the demand for risky assets supported by low rates and a “hunt for yield”.
Finally, we find that a continued high valuation discrepancy between growth and value stocks offers good opportunities for stock selection, especially within emerging and frontier markets.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request have been expired. Please,
Access recover request have been expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at firstname.lastname@example.org
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: