Emerging markets have had different approaches to coping with COVID-19 and are at different stages of recovery. Our emerging markets equity team examines trends, news and data shaping emerging markets in the third quarter, and shares its latest outlook.

Three Things We’re Thinking About Today

  1. Brazil has been among the hardest hit by the COVID-19 pandemic, just behind the United States and India in the number of reported cases. However, we have started to see the number of new cases in Brazil start to decline. Ironically, we believe that the government’s decision against implementing a country-wide lockdown at the onset of the pandemic has reduced the likelihood of a second wave. Heavy government spending and monetary policy easing have helped bring some stability to the economy. Moreover, Brazil has continued to implement key reforms despite political noise. In terms of investment opportunities, we continue to favor the financials sector, especially companies with strong capital market exposure. Interestingly, Brazil’s stock exchange itself has a strong sustainability agenda, while environmental, social and governance (ESG) principles are not only implemented within the exchange itself, but also promoted in the Brazilian stock market broadly. E-commerce is another exciting investment theme, with several large players competing in the online space. As in other countries, the COVID-19 crisis has accelerated the adoption of internet-based retailing in Brazil. Despite continued uncertainties, our view on Brazilian equities is generally positive.

  2. The COVID-19 pandemic has underscored the importance of health care in China, reinforcing existing structural trends that could drive a new wave of innovation in the country. Multiple factors are propelling domestic drug and medical device development including rising health care demand, an aging population, growing lifestyle diseases and rising income, coupled with government efforts to strengthen the health care system. In addition, the growing numbers of overseas-educated

By Lawrence White

LONDON (Reuters) – Does a cancelled gym membership spell financial disaster?

That is the type of question British banks are asking as they try to work out whether borrowers owing some 75 billion pounds ($96 billion) in home loans will be good for it when a payment holiday, introduced when the coronavirus crisis first hit, ends.

Lenders are scouring current account transactions, credit card spending and trends in Internet searches for clues about customer finances as part of a wider effort to understand the damage to their portfolios from the pandemic.

The once-in-a-lifetime mix of economic shutdowns, unprecedented government support and an uncertain path to recovery have upended old risk models, based on historical data, necessitating a more dynamic, forward-looking way of analysing lending risk. The searches involve pouring over anonymised data and are a way of surveying overall risk rather than individual customer habits.

The stakes are high: underestimate the risks and bank bosses and shareholders could be in for a nasty jump in losses, overestimate them and banks could rein in lending when it is needed most.

Executives at Britain’s top banks say calculating the hit to loans, from mortgages to corporate debt, is the biggest risk management challenge they have seen since the 2008 crisis.

“This time there is economic volatility beyond what we have ever seen, there is unprecedented government support, and to try and model it all with 100% accuracy is impossible,” said Matt Waymark, director of finance at NatWest Group <NWG.L>.

Some 300 billion pounds in payment breaks were granted on British mortgages, part of a series of measures aimed at propping up households hit by the virus, and around 70-80% of those have resumed payments, bankers and analysts told Reuters.

That leaves nearly $100 billion outstanding at a time when

D.j. Mattern had her Type 1 diabetes under control until COVID’s economic upheaval cost her husband his hotel maintenance job and their health coverage. The 42-year-old Denver woman suddenly faced insulin’s exorbitant list price — anywhere from $125 to $450 per vial — just as their household income shrank.

She scrounged extra insulin from friends, and her doctor gave her a few samples. But as she rationed her supplies, her blood sugar rose so high her glucose monitor couldn’t even register a number. In June, she was hospitalized.

“My blood was too acidic. My system was shutting down. My digestive tract was paralyzed,” Mattern said, after three weeks in the hospital. “I was almost near death.”

So she turned to a growing underground network of people with diabetes who share extra insulin when they have it, free of charge. It wasn’t supposed to be this way, many thought, after Colorado last year became the first of 12 states to implement a cap on copayments that some insurers can charge consumers for insulin.

But as the coronavirus pandemic has caused people to lose jobs and health insurance, demand for insulin sharing has skyrocketed. Many patients who once had good insurance are now realizing the $100 cap is only a partial solution, applying just to state-regulated health plans.

Colorado’s cap does nothing for the majority of people with employer-sponsored plans or those without insurance. According to the state chapter of Type 1 International, an insulin access advocacy group, only 3% of patients with Type 1 diabetes under 65 could benefit from the cap.

Such laws, often backed by pharmaceutical companies, give the impression that things are improving, said Colorado chapter leader Martha Bierut. “But the reality is, we have a much longer road ahead of us.”

After D.j. Mattern lost her health insurance earlier this year, she turned to an underground network to secure insulin for her Type 1 diabetes before recently qualifying for Medicaid. At home in Denver, Mattern displays her insulin pens. (Rachel Woolf for KHN)
After D.j. Mattern lost her health

Bond funds (including ETFs) witnessed their first week of net outflows in 25 for the Refinitiv Lipper fund-flows week ended September 30, 2020, handing back a net $1.1 billion. While investors continued to inject net new money into corporate investment-grade debt funds (+$2.1 billion), they were net redeemers of corporate high yield funds (-$3.6 billion) and flexible funds (-$808 million).

With the U.S. equity market witnessing declines over the preceding few weeks, it’s not too surprising to see equity funds and high yield bond funds suffer net redemptions. However, equity funds only handed back a net $32 million for the fund-flows week (for their seventh consecutive week of net outflows), with conventional equity funds suffering net redemptions of $5.024 billion and equity ETFs attracting some $4.992 billion. For the fund-flows week, the average equity fund returned a handsome 3.17%.

However, in the high yield funds space, both conventional high yield funds (-$2.5 billion) and high yield ETFs (-$1.1 billion) witnessed net redemptions as concerns over credit quality, soft economic data, and a call by the Federal Reserve Board for an additional round of Congressional stimulus have some investors beginning to shun risky assets despite the average high yield fund posting a weekly return of 0.37%. For the fund-flows week, the iShares iBoxx $ High Yield Corporate ETFs (NYSEARCA:HYG) suffered the largest net outflows in the taxable fixed income universe, handing back a net $1.2 billion, while the iShares 20+ Year Treasury Bond ETF (TLT, $426 million) was the main attractor of investors’ money.

Year to date through the week ended September 30, corporate investment-grade debt funds (including ETFs) have attracted the largest share of investors assets (+$154.7 billion), while corporate high yield funds (+$34.8 billion), government Treasury & mortgage funds (+$22.9 billion), and government Treasury funds (+$15.5 billion) were the

He started as a cook in the Michelin-starred Antonio Restaurant, and then quickly rose through the ranks to become head chef in just three years. “The opportunities are definitely better in Macau as many hotels, casinos and resorts have opened here,” said the 31-year-old.

Last year, he was the given the task of opening Paulaner Brahaus, a franchised German restaurant in the former Portuguese colony. Tavares was on track to open in late January when the Covid-19 outbreak in China brought tourism to a standstill, disrupting plans and pushing back the opening of the 150-seat outlet by nearly a year to December.

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Tavares’ predicament and those linked to the city’s tourism industry show that Macau’s reliance on gaming, tourism and affiliated services is hurting its economy as it accounted for 70 per cent of its revenues in the first eight months of this year.

Macau needs to move quickly to diversify its economy to provide new job opportunities and income sources for its growing population, especially in light of the havoc wrecked to its mainstay tourism industry by the coronavirus pandemic, say analysts and veteran businessmen.

Just before the Covid-19 pandemic derailed the city’s economy, Beijing announced a raft of policies in December last year aimed at diversifying Macau’s economy and forging closer integration with the Greater Bay Area by building its financial services industry, while maintaining its position as a leading gaming and tourism centre.

President Xi Jinping, during his three-day visit to Macau in December last year to mark the 20th anniversary of its return from Portuguese to Chinese rule, backed the city to develop into a service platform for commercial and trade cooperation between China and Portuguese-speaking countries. Xi