CoreMacro
| Emerging Markets
Research on emerging economies, from in-depth country reports to calls on EM stocks, bonds, and currencies.
Contrary to widespread narratives, there is little cash on the sidelines. The aggregate amount of investable funds-to-equity market cap ratio is at an all-time low in the US and very low in other developed markets.
The precious metal bonanza has not resolved the South African economy’s plight. Nor did it improve its public debt sustainability issues. Investors should brace for a reversal in South African stocks, bonds, and the currency.
Go long KRW versus USD. Within an EM equity portfolio, overweight Korean tech and stay neutral on Korean non-tech. However, we are not bullish on the Korean bourse's absolute performance.
At major technical crossroads, markets eitherpull back before staging a sustainable breakout, or attempt to break out only to drop considerably (i.e., a fakeout). We believe the latter dynamics are more likely to play out.
There will be little market and macro implications from the US intervention in Venezuela. Fade away any near-term moves in global oil markets. However, Colombian and Peruvian assets will benefit from lower political risk premiums. We are upgrading Colombian equities and fixed income to overweight versus EM.
Following this weekend's election, we reiterate an overweight stance across Chilean risk assets relative to EM benchmarks and advise buying local currency government bonds (currency unhedged).
We remain bullish on the alpha-generating potential of Vietnamese stocks over the medium and long term. But our negative outlook on global/EM beta makes us bearish on this bourse in absolute terms over the medium term.
Mexican equity and fixed-income markets will continue outperforming their EM counterparts, regardless of whether global risk assets sell off or not. Also, we recommend a new trade: long Mexican stocks / short the S&P 500.