OPINION | October focus on politics in emerging markets By Sukumar Rajah READ:
The week-long National Congress of the Chinese Communist Party begins on Oct. 16. This gathering takes place every five years and is expected to re-appoint Xi Jinping as the president for a new term of five years. The Congress will also appoint a new premier, as Li Keqiang is stepping down. Two new members of the Politburo Standing Committee of the Chinese Communist Party are also likely to be nominated.
Investors should look through the elections and focus on market-friendly developments in the coming 12 months. The potential for interest rate cuts in 2023 stands out given the central bank hiked interest rates ahead of most other central banks globally, and inflation may have recently peaked. If inflation continues to trend down, there is room for a less restrictive monetary policy, with a positive impact on the Brazilian stock market.
Using real interest rates as a proxy for the monetary policy stance, markets such as Brazil are experiencing tight monetary policy, whereas policy in the United States and euro area remain loose. This has implications for the timing of eventual rate cuts, with Brazil likely to join China in cutting rates in 2023. In isolation, this is would be positive for investors.
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