(from my colleagues Dr. Win Thin and Ilan Solot)

Falling commodity prices and better US economic data are the biggest macro drivers for EM, overriding just about all idiosyncratic variables – perhaps with the exception of the weaker yen for Korea. We note that aside from the huge fall of over 40% in the price of Brent oil from its highs, iron ore is down about 50% this year. Brazil, China and India are the biggest EM producers of iron ore. Markets are also becoming apprehensive of the parabolic rise in Chinese equities, in part due to expectations for further easing, which could be dashed just as fast as they have been created. Indeed, we think downside risks will continue to emanate from China, and could add more negative impulses to EM sentiment ahead.

Czech Republic reports November CPI Tuesday, expected to remain steady at 0.7% y/y. While economic data have been firm recently, we think downside risks remain high. October IP, trade, and construction output were all softer than expected. We expect the EUR/CZK floor to be maintained until 2016.

Hungary reports October trade Tuesday, expected at EUR700 mln vs. EUR939 mln in September. central bank minutes will be released Wednesday. This will be followed by November CPI Thursday, expected at -0.5% y/y vs. -0.4% in October. Deflation risks continue, and we think the central bank may have to resume easing next year.

South Africa reports October manufacturing production Tuesday, expected to rise 2.4% y/y vs. 8.0% in September. It then reports CPI Tuesday, expected at 5.8% y/y vs. 5.9% in October. Core is expected to remain steady at 5.7% y/y. October retail sales will also be reported Tuesday, expected to rise 2.1% y/y vs. 2.3% in September. Q3 current account data was worse than expected, with the deficit coming in at -6% of GDP.

Chile reports November trade Tuesday, expected at $425 mln vs. $563 mln in October. The central bank meets Thursday and is expected to keep rates steady at 3.0%. Brazil trade data was awful for November, and so we expect similar readings from Chile. The central bank is likely on hold as inflation moves further above the 2-4% target range, with the weak peso adding to price pressures.