Emerging Markets Pulse — 2026-05-22
Emerging markets are navigating a treacherous macro backdrop as surging U.S. bond yields and Iran-war inflation fears continue to weigh on EM assets, though a late-week rally on U.S.-Iran peace-talk progress offered some relief, with the Nikkei surging 2.68% and Wall Street indexes closing modestly higher on May 21. JPMorgan is now calling for Turkey's central bank to hike rates imminently to 40%, making CBRT the week's most-watched policy actor, while India's RBI is actively defending the rupee with at least $2 billion in intervention. The single biggest country-specific story is Vietnam's Dien May Xanh electronics retail chain targeting a $546 million IPO — a rare large-cap EM equity issuance amid a challenging global capital-markets environment.
Emerging Markets Pulse — 2026-05-22
Market Snapshot
| Benchmark | Level | Weekly Change | Driver |
|---|---|---|---|
| S&P 500 (SPX) | 7,445.72 | +0.17% | Late rally on U.S.-Iran peace-talk hopes; Nvidia earnings beat |
| Nikkei 225 (N225) | 63,339.07 | +2.68% | Risk-on rotation into Asian equities as oil prices moderated |
| STOXX 600 | 623.72 | +0.51% | Europe AI stocks outperformed; Iran-war gloom partially offset |
| FTSE 100 | 10,477.16 | +0.32% | Broad risk recovery; energy stocks mixed amid Iran-war uncertainty |
| Dow Jones (DJI) | 50,285.66 | +0.55% | First record close since February on Mideast peace progress reports |
| NASDAQ (IXIC) | 26,293.10 | +0.09% | Nvidia results seen as proof AI investment thesis intact |
Note: Dedicated MSCI EM Index, EMBI Global Spread, and EM local-currency bond index levels were not available in verified post-May 20 data. The figures above reflect the broadest market snapshot available from confirmed sources.
This Week's Big Story
JPMorgan Forecasts Turkey Central Bank to Hike to 40% Imminently
JPMorgan issued a high-profile call on May 22 forecasting that Turkey's Central Bank of the Republic of Turkey (CBRT) will lift its benchmark interest rate to 40% imminently, a hawkish pivot that would reverse months of CBRT easing. The call signals that sticky inflation and renewed currency pressure — a pattern common across EM economies navigating the Iran-war commodity shock — are forcing Turkish policymakers to reverse course. Markets had priced in a more gradual tightening path; an imminent move to 40% would represent a significant upside surprise and is expected to trigger sharp lira volatility and a reassessment of Turkish sovereign spreads. Investors in Turkish local-currency government bonds (TRY GBs) and the lira should treat this as a near-term tail risk to watch closely.
Central Bank Watch
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CBRT (Turkey): JPMorgan called on May 22 for an imminent rate hike to 40%, up from the current level. The CBRT had previously cut 150 basis points to 38% in December 2025 from a peak of 50%, but renewed inflationary pressure from the Iran-war commodity shock appears to be forcing a reversal. A move to 40% would mark a sharp hawkish pivot and test lira stability.
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RBI (India): The Reserve Bank of India intervened in FX markets with at least $2 billion on Thursday, May 22, to defend the rupee — the most concrete sign yet that the RBI is prioritising exchange-rate stability amid global volatility. Separately, sources told Reuters the RBI is not in favour of hiking rates to defend the rupee, instead prioritising its inflation mandate, suggesting continued FX intervention rather than policy rate tightening as the primary defence tool.
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BI (Indonesia): Bank Indonesia's policy posture came into focus after Q1 current account deficit data released May 22 showed a deficit of 1.09% of GDP. Indonesia also announced exemptions for nickel pig iron and certain palm oil derivatives from its centralised export policy — a move that could affect commodity export revenues and the trade balance going forward.
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NBP (Poland): Poland's energy policy added a new fiscal wrinkle on May 22 as the country's assets minister confirmed a proposed windfall tax could cost state energy giant Orlen $1.6 billion — a development with implications for government revenue, the zloty, and broader fiscal credibility as the NBP monitors its policy path.
Country Spotlights
Turkey — JPMorgan Calls Imminent Rate Hike to 40%
- What happened: On May 22, JPMorgan publicly forecast that the CBRT will raise its policy rate to 40% imminently. The bank had cut from a 50% peak to 38% through late 2025, but inflation re-acceleration tied to the Iran-war commodity shock appears to have changed the calculus.
- Market impact: Turkish lira assets are on alert; an unscheduled or emergency rate decision would send shockwaves through TRY bonds and equities. The lira had already been under pressure from broader EM FX weakness.
- What's next: Watch for any emergency CBRT meeting announcement or off-cycle rate decision. The next scheduled CBRT meeting is a key date for all EM investors.
India — RBI Defends Rupee With $2 Billion Intervention, Rules Out Rate Hikes
- What happened: On May 22, the RBI carried out at least $2 billion in FX market intervention on Thursday to stem rupee depreciation. Sources simultaneously confirmed the central bank will not raise rates to defend the currency, preferring to use its reserves.
- Market impact: The rupee received near-term support from the intervention, but the rejection of rate hikes as a defence tool signals that the RBI's real-rate differential versus the U.S. will remain compressed — a structural drag on portfolio inflows. India's job market is also under additional strain, with the Iran war hitting remittances and trade.
- What's next: Watch the RBI's foreign exchange reserve data and rupee spot levels. Any sustained weakening below key technical levels could force the bank to either escalate intervention or reconsider its rate stance.
Vietnam — Dien May Xanh Eyes $546 Million IPO
- What happened: Vietnamese electronics retail chain Dien May Xanh announced on May 22 that it aims to raise approximately $546 million from an initial public offering — one of the largest EM equity issuances announced this week.
- Market impact: The IPO represents a significant test of investor appetite for Vietnamese consumer-facing equities in a challenging global rate environment. Vietnam's export-oriented economy has been partially shielded from the Iran-war commodity shock, making it a relatively bright spot among Southeast Asian EMs.
- What's next: Watch IPO pricing and institutional book-building progress. Robust demand would be a positive signal for Vietnamese equity inflows and could catalyse renewed interest in other Southeast Asian consumer stories.
Kenya — Government Cuts Diesel Price After Transport Strike
- What happened: Kenyan public transport operators called off a national strike on May 22 after the government agreed to cut the diesel price, responding to protests over soaring energy costs driven by the Iran-war oil shock.
- Market impact: The climbdown avoided a prolonged economic disruption in Nairobi and other major cities but signals fiscal pressure on the Kenyan government, which must now absorb the subsidy cost at a time of already stretched public finances.
- What's next: Watch Kenya's fiscal balance and whether the fuel subsidy expands to other energy products. Shilling stability and sovereign spread widening are the key market indicators to monitor.
Capital Flows & Positioning
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Asia Wealth Reallocation: Citigroup's global wealth head Andy Sieg announced on May 22 that Citi will allocate a significant portion of its global wealth management hiring to Asia, where its private bank is growing faster and generating higher productivity than in other regions. This is a concrete institutional signal that capital and talent are being redirected toward Asian EM markets, even as global bond yields remain elevated.
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Iran-War Risk Premium Persisting: BCA Research warned this week that the outlook for global stocks is "poor" amid inflation concerns, and that only a material drop in equities would arrest the bond rout. For EM allocators, this translates to continued spread widening risk on EMBI instruments and muted appetite for dedicated EM equity ETFs (EEM, VWO) until the U.S.-Iran geopolitical backdrop clarifies.
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China Cross-Border Securities: China's National Development and Reform Commission (NDRC) stated on May 22 that China does not compel tech firms to reject foreign investment — a targeted message to reassure international portfolio investors amid ongoing scrutiny of cross-border capital flows. Separately, China's securities regulator (CSRC) announced a crackdown on illegal cross-border securities activities, a dual signal of openness and tighter enforcement.
Institutional View
The IMF's April 2026 World Economic Outlook — titled "Global Economy in the Shadow of War" — projects global growth at 3.1% in 2026 and 3.2% in 2027, both below recent outcomes and well below pre-pandemic averages. Global headline inflation is expected to tick up in 2026 before resuming its decline, with the IMF's reference forecast putting it at 4.4% this year. The Fund explicitly flags the Iran conflict as a primary drag, noting that its reference forecast assumes limited conflict — meaning a scenario of escalation would push growth lower and inflation higher than current projections. For emerging markets specifically, the IMF warns that commodity-price volatility, higher-for-longer U.S. rates, and tightening global financial conditions represent compounding headwinds.
BCA Research's concurrent assessment (May 22) adds a sell-side dimension: the firm characterises the stock market outlook as "poor" given the inflation-yield spiral, and argues that only a meaningful equity correction would break the bond rout. For EM portfolio managers, this creates a difficult asymmetry — a DM equity correction would likely trigger EM risk-off contagion via outflows, while a no-correction scenario keeps yields elevated and compresses EM carry.
What to Watch Next
- CBRT Emergency/Off-Cycle Decision (Imminent): JPMorgan flagged on May 22 that Turkey's central bank could move to 40% at any time. An unscheduled hike would be the most market-moving EM event of the coming days — watch Ankara headlines closely.
- RBI Foreign Exchange Reserve Data (Weekly, next release ~May 30): After at least $2 billion in intervention on May 22, the pace of reserve drawdown will be a key indicator of how long the RBI can sustain rupee defence without adjusting policy rates.
- Vietnam Dien May Xanh IPO Book-Building: With $546 million targeted, institutional demand data will signal broader Southeast Asian EM equity appetite. Watch for roadshow updates in the coming weeks.
- U.S.-Iran Peace Talks Progress: Wall Street's Dow Jones posted its first record close since February on May 21 on Mideast peace hopes — any breakdown in negotiations would immediately transmit to EM oil-importing countries via energy costs and to Gulf EM sovereign spreads via the risk channel.
- Poland Orlen Windfall Tax Decision: The Polish assets minister confirmed on May 22 that the proposed windfall tax could cost Orlen $1.6 billion. A legislative vote or final ruling would have direct implications for Poland's fiscal stance and zloty trajectory.
Reader Action Items
- Review Turkey exposure urgently: With JPMorgan calling an imminent CBRT hike to 40%, any portfolio with Turkish lira bonds, equities, or unhedged TRY exposure faces near-term rate-shock risk. Consider reducing duration or adding lira hedges ahead of a potential off-cycle decision.
- Flag India as a split-signal story: The RBI's dual posture — aggressive FX intervention without rate hikes — creates an unusual setup where the rupee receives near-term support but the real-rate differential compresses over time. Research the trade-off between short-term rupee stability and medium-term portfolio inflow dynamics before adding INR-denominated assets.
- Monitor the Vietnam IPO pipeline as a Southeast Asia barometer: The Dien May Xanh $546 million IPO is a live stress test of investor appetite for frontier/EM consumer equity issuance. If the deal prices well, it signals a reopening window for Vietnamese and broader ASEAN equity capital markets — a potential rotation opportunity for underweight allocators.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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