EM Preview for the Week Ahead

We continue to see divergences within EM. CLP and TRY underperformed last week, while MXN and ZAR outperformed. Rather than seeing EM-wide buying, investors are being much more discerning and that is a good thing at this stage of the rally. Korea and Taiwan report trade data this week that should support our view that emerging Asia is likely to outperform, pulled up by the recovery in mainland China. Continue reading “EM Preview for the Week Ahead”

EM Equity Allocation Model For Q3 2020

• Since our last model update on November 14, our proprietary EM equity portfolio is up 7.7% and outperforming MSCI EM, which rose 4.9%
• Our 1-rated grouping (outperformers) for Q3 2020 consists of Korea, Hungary, China, Qatar, and Turkey
• Our 5-rated grouping (underperformers) for Q3 2020 consists of Pakistan, Argentina, India, Mexico, and South Africa
• EM has rallied sharply in recent weeks, helped by growing optimism that we’ve seen the worst of the pandemic
• MSCI EM FX has lagged, retracing only half of this year’s drop before running out of steam

Continue reading “EM Equity Allocation Model For Q3 2020”

EM Preview for the Week Ahead

The dollar got some traction against the majors towards the end of last week. This weighed on EM FX, with the high best currencies TRY, BRL, CLP, and ZAR leading the losers. We downplay risk of contagion from Turkey, but we acknowledge it will keep investors wary of the countries with poor fundamentals. Failure to pass the next stimulus bill in the US may weigh on sentiment as the week begins.

Continue reading “EM Preview for the Week Ahead”

EM FX Model For Q3 2020

  • EM FX has rallied steadily from the pandemic lows back in March
  • Given our constructive outlook on global growth, we believe MSCI EM FX should test the early March high near 1641
  • Divergences amongst the major EM currencies should continue
  • Our 1-rated (strongest fundamentals) grouping for Q3 2020 consists of TWD, THB, KRW, CNY, and MYR
  • Our 5-rated (weakest fundamentals) grouping for Q3 2020 consists of RON, ARS, LKR, TRY, and PKR
  • Since our model was last updated on November 18, it has done a relatively good job in identifying vulnerabilities within EM
  • Our next EM FX model update for Q4 2020 will come out in October

Continue reading “EM FX Model For Q3 2020”

EM Sovereign Rating Model For Q3 2020

The major ratings agencies continue to downgrade sovereign ratings across both EM and DM. Our own sovereign ratings model suggests that there is still more pain to come.

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EM Preview for the Week Ahead

EM currencies took advantage of broad dollar weakness against the majors last week, with most gaining against the greenback. Yet the week ended on a bit of a risk-off note as concerns intensified about the resurgent virus and the impact on the still-weak global economy. This sentiment may carry over into this week as markets await final July global PMI readings earlier in the week and key US jobs data Friday. Continue reading “EM Preview for the Week Ahead”