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Commentary

EM Is No Longer a Commodity Play

The Emerging Markets (EM) asset class is often labelled a commodity play for investment purposes. The argument is simple and directional; EM countries export commodities, so rising commodity prices are good for the asset class, whereas falling commodity prices hurt EM countries.

Commentary

Equity Outlook 2021: Emerging Markets

2020 will live long in memory, and so it should. EM have navigated, and in some cases excelled, during the most challenging stress test in recent history. The crisis will ultimately prove temporary, in our opinion, and 2021 is well placed to be a year of recovery.

Commentary

2021 Outlook: Seven Themes for a Post-Vaccine World

Science is winning the battle against the covid-19 coronavirus. The advance in therapies has already contributed to a significant reduction in hospitalisation and fatality rates vis-à-vis the number of cases, while the multiple of approved and soon to be approved vaccines puts the livelihoods of billions of people on track to normalise in 2021.

Commentary

US Elections and EM

Noise levels are likely to remain elevated in the run-up to – and possibly in the immediate aftermath of the upcoming US presidential election, but the post-election outlook should prove positive for EM assets by ushering in a period of more positive risk-sentiment, a long period of low US rates and a lower Dollar.

Commentary

The Case for EM Investment Grade USD Bonds

Overall, EM IG bonds represent a great opportunity for investors seeking to monetise the EM risk premium with moderate volatility in a world, where higher yielding IG-rated securities are increasingly difficult to come by.

Commentary

The EM Fixed Income Universe

Welcome to the 9th annual review of the Emerging Markets (EM) fixed income asset class. Using new data from the Bank of International Settlements and other sources, we establish that the EM bond market has expanded by 12% in Dollar terms in the past twelve months to a size of USD 29.6trn, or 25% of the global fixed income universe as of the end of 2019.

Commentary

Is 9 Times More Yield Enough for You?

Does 9 times higher yield in EM than in US bonds make for an attractive investment proposition? We lay out the arguments. 

Commentary

The China Witch Hunt

The common characterization of US-China relations as a new Cold War is wrong. Instead, the most recent spike in tensions between the two countries – the second time this has happened since US President Donald Trump took office in 2016 – is primarily motivated by political considerations ahead of the November US presidential election.

Commentary

Status Update: Coronavirus and EM Fixed Income in 2020 and Beyond

As of 27 April 2020, eighteen times more people have died from coronavirus per million of the population in developed countries (DMs) than in Emerging Markets (EM). This is partly due to measurement problems, but there may also be genuine structural reasons for expecting slower spread, less overall incidence, and lower mortality rates in EM countries than in DMs.

Commentary

The Triple Shock and EM Equities: First-In First-Out?

Global stock markets have been struck by a triple shock; global pandemic, energy price war and market rout from full valuation levels in developed markets. Each of these types of shocks has been seen, and recovered from, previously.

Commentary

It is here again – the VIX spike!

The VIX index has spiked. Over more than twenty years, VIX spikes have been excellent guides to when to put money to work in EM fixed income and equities. Investors have, on average, generated 262bps of excess return in EM fixed income and 234bps of excess return in EM equities by putting money to work during VIX spikes relative to a ‘timing agnostic’ investment strategy.

Commentary

The Power of Carry

Quantitative Easing (QE) policies in developed countries triggered a flight from yield in EM as investors pursued capital gains in developed markets instead. As the capital gains in developed markets fade and with yield nowhere to be found, a search for yield in EM has finally begun.

Commentary

The 2020-2024 EM Fixed Income Outlook

Following another year of strong returns, Emerging Markets (EM) fixed income has outperformed developed bond markets by a significant margin over the past four years. The outperformance is likely to continue in 2020, because EM fixed income remains attractively priced both in absolute terms and relative to bonds in developed markets as well as under-owned and well-supported by an improving fundamental backdrop.

Commentary

The Missing Point in the Global Growth Debate

Global growth is decelerating. Policy-makers in developed economies are gearing up for yet more fiscal spending. While fiscal spending may support growth for a short time, and for longer if very carefully applied, it will not change the growth outlook fundamentally.

Commentary

The Power of Top Down: 7 Implications for Em Equity Investors

Welcome to Emerging Markets! A huge array of economies all at various stages of development and maturity with different capital market structures. Add in as many different currencies, political frameworks and policy stances and the result is a complex, diverse, evolving and inefficient market universe.