EM down 5% since the surprise China PMI contracting print.  china map flagThis was a 6m low for China manufacturing and reinforced that China's 4Q slowdown was more than seasonal.

  • Investors were caught off guard by Chinas contracting PMI (6month low) combined with US vol and price dip.
  • EM selling off as rates go lower is a surprise and caused greater consternation but we are not in EM crisis of yesteryear despite sentiment being as bad:
    • EM doesn’t have dollar debt like before (maybe Turkey)
    • But FX could get worse and as equity investor in EM this is always at least half of your return profile (and why there is a huge positive opportunity – but not yet)
    • EM debt still crowded but not as retail oriented
    • Indonesia, Brazil and Turkey all at some point have a backstop in that there is a real yield baseline now that makes these places interesting to investsg2014012442068sg2014012442004
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