- 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 invest
Tagged with: FX