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Investor Insights Global

18 Feb 2019   Macro, Currencies, Policy, Global

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

Since their post-FOMC peak on January 31, both MSCI EM and MSCI EM FX have fallen. Virtually every EM currency has given up their post-FOMC gains, the lone exception being MYR (+0.2%). The worst performers have been ZAR (-6%), ARS (-3.3%), and TRY (-2.3%). This supports our belief that the liquidity and low US rates story is not enough to sustain the EM rally on its own. What’s still missing is an improved global outlook and we certainly didn’t get that with the US retail sales data.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week mixed but gave up much of their post-FOMC gains as the week progressed. MYR, PHP, and MXN were the best EM performers for the week and posted small gains. ZAR, BRL, and ARS were the worst in EM, dropping nearly 2% against USD. US-China trade talks and Chinese data are likely to set the tone for EM this week. Reports that the US government may shut down again should weigh on risk assets.

Uncertain Global Outlook Highlights GCC Debt Opportunity

As investors around the world brace for continued uncertainty in 2019 that will test the steeliest of nerves, the outlook for debt markets in the Gulf Co-operation Council (GCC) region is a much brighter one, with the potential for strong risk adjusted returns.

BBH: EM Preview for the Week Ahead

EM FX ended the week on a soft note as the dollar remains resilient. Very weak EM PMI readings so far in January are very concerning and underscore why we remain negative on EM despite the Fed capitulating to the market and tilting more dovish. Firmer currencies should allow EM central banks that meet this week to keep rates steady.

Safe Enough: Investors Likely to Sit Out Volatility in Traditional Havens

Last year marked the first in decades when global markets ended with a net loss across most asset classes. As the investors begin to earmark potential destinations for their retreat when the time comes to cut their losses and run, they may be hesitant to funnel everything into the historical safe havens such as US Treasuries, developed market sovereigns, and gold.

Burning Down the House: Reserve Currencies and Emerging Markets

Reserve currencies are a kind of macroeconomic insurance, which guarantees access to financing during economic accidents. Reserve currency status can be unknowingly squandered, but it can also be sacrificed deliberately in place of undertaking macroeconomic adjustment. Which path is Trump taking?

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week on a soft note, as the dollar remains resilient. While a softer US interest rate outlook benefits EM, we think this is offset by the deteriorating global growth outlook. The IMF will release its updated World Economic Outlook Monday, which is likely to highlight the growing downside risks.

Duet Group: “Frontier Countries Growing in Spite of Governments, Not Because of Them”

In an exclusive interview with Bonds & Loans, Joe Delvaux, Senior Fund Manager at Duet Asset Management, delves into frontier markets, assessing their performance in 2018, providing insight into investor sentiment on broader EM assets, and takes a glimpse into what 2019 might bring.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week on a soft note after rallying most of the week on the dovish shift in the Fed’s messaging. Until US rates adjust back to pricing in no US recession, it will be hard for the dollar to maintain much traction and so this EM bounce can continue. Yet other risks to EM remain in place, including slower growth in China and globally.

Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX ended the week on a firm note as stronger than expected US jobs data fed into risk-on sentiment. Fed Chair Powell also added to the positive sentiment Friday as he addressed basically every area of concern that the markets have had with the Fed. US rates backed up but not by enough to lend the dollar much support. In this current “wait and see” period regarding the US economy and the Fed, we suspect the dollar will have trouble getting much traction and so this EM bounce could continue near-term.

 

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