Eq: EMs

(Istanbul)

Emerging markets had a rough first half to the year. Between rising western rates and a trade war, there was not a lot to be happy about in EM assets. Then, a few weeks ago, many sources were saying the bear market was over and it was time for a rally. However, investors need to stay sharp, as EM currencies are still sliding, which will lead to lower growth. Weaker currencies also make it hard to pay back Dollar-denominated debt, which could hurt credit. There are also country-specific issues, like the growing trade battle between Turkey and the US.


FINSUM: There are still a lot of macroeconomic developments moving against EMs, but to be fair, the best rallies start in the darkest hours.

(Istanbul)

Emerging markets have had a rough year, with many major indexes, including in China and Brazil being in or near bear markets. This has led to a great deal of anxiety over the direction of assets, both stocks and bonds, in EM nations. Well, July may be the start of a new phase, at least according to Goldman Sachs. The bank says the emerging markets have hit their bottom and are now poised for a rally. Goldman reminds investors that big asset price moves in EMs are not uncommon, and that this year’s losses are quite ordinary.


FINSUM: The big question here is whether EM equities or credit are a better bet at the moment. Looking historically, credit seems to have a better risk/reward proposition when getting in early in a rally.

(New York)

Emerging markets have been on a wild ride this year, with many entering into bear markets. But what about EM debt? That market has faced headwinds as the US Dollar is strengthening on the back of expectations for higher rates. However, some bond fund managers really like EM debt right now. While USD denominated debt from countries like Argentina get a lot of the attention, local currency EM debt can be very rewarding. In Brazil and Mexico, for instance, local currency bonds are yielding 10% and 7%, respectively. Other countries with solid local currency debt are South Africa, India, and Indonesia.


FINSUM: So there seem to be two big risks here. One is the exchange rate risk, and the other is credit risk. That said, these yields do seem to be rewarding, and worthwhile if they are a small part of a portfolio.

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