Results for search of category: Emerging Markets

No Read Across in EM

Concerns about the credit quality of EM Bonds are rising. Some of the countries often cited are frontier, rather than emerging markets, but the concerns are well-founded. For us, the key difference from other bond categories is that the Fed won’t be buying them. We don’t think there is a read-across to EM Equities, which are now less volatile than the US, mainly because the major Asian economies have dealt with the virus better.  [Read More... ]

One Disease; Three Themes

Three interesting ideas emerge from our regular reports. First, the volatility shock will almost certainly be as bad as 2008. Second, we believe that a long Technology /short Energy trade will have a positive pay-off no matter whether equity markets rise or fall. Third, our models are increasing exposure to EM Equities. We recognise this is a contrarian trade, but it is well-supported by our process and doesn’t depend on one or two countries.  [Read More... ]

Asia: First In, First Out

The recent volatility shock is as big as the one in the middle of the GFC and it isn’t over yet. It has also happened three times faster, in three weeks rather than nine. Fear is inevitable, but the are some interesting opportunities, especially in Asia. Countries like Taiwan and South Korea have managed the corona virus better than the US or Europe, while China is already recovering. If you wait for the bounce in the West, you may miss it in the East.  [Read More... ]

EM Bonds: the new safe haven

Many investors, brought up on the Tequila crisis of 1994, or the Thai baht crisis of 1997, or others too numerous to mention, may be surprised to see EM Sovereign Bonds at the top of our euro asset allocation model and at #2 in the US$ version. Times have changed. The volatility of the EM bond portfolio (but not necessarily individual countries) is less than 7-10 year Treasuries and the yield is a lot higher. They deserve their ranking.  [Read More... ]

Where Have All the Leaders Gone?

Two weeks ago, we had the lowest number of net buying opportunities for individual countries since May 2000. It’s hard to be bullish about global equities as an asset class when there are so few leaders. Japan is one of just three countries which look attractive on our system, but nobody seems to care.  [Read More... ]

Equal and Opposite Signals

The macro picture remains confused, so we are reduced to talking about signals which may appear in the near future. On present trends, we expect EM Equities to overtake their moving average and EM Bonds to drop below theirs. Both are measured relative to the equity and fixed income models as appropriate. At first, the switching opportunity would be for EM specialists, but it may develop wider significance.  [Read More... ]

New Risk Conditions Indices

This week we introduce four new risk conditions indices covering the equity and government bond markets of selected emerging market and developed countries. They highlight the fact that the relationship between equity and bond volatility is abnormal, given their recent relative performance.  [Read More... ]

Show Me the Damage

So far, most of the damage inflicted by US/China trade tensions has been on EM Equities. Our models suggest they peaked over a month ago and there is no support until we get well into underweight territory. The danger is that equity weakness turns into FX volatility, affecting EMs and DMs. We know this is always dangerous for risk assets in general.  [Read More... ]


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