Emerging Markets 03 (Sep 16 - Dec 27)

[winston]

BlackRock Feels Bullish, Sees Emerging Asia At “Turning Point”

By Shuli Ren

China’s economy is on a rebound. The data point Turnill really likes is that producer prices in China turned positive for the first time in nearly five years (see chart).

This means improving corporate profits and “should support emerging market (EM) Asia, as business cycles and market returns there are increasingly correlated with those in China.”

Foreigners have bought a net $13 billion of regional bonds this year and appear to be returning to equities, EPFR Global data show.

Overall, we see compelling reasons to invest selectively in EM Asia long term.

We favor assets in Indonesia and India.

Rate cuts in Indonesia support more corporate investment and consumer spending, while India has implemented key reforms to its tax system and bankruptcy code.

Source: Barron's Asia

http://blogs.barrons.com/asiastocks/201 ... ing-point/

[winston]

Why Emerging Markets Currencies Can Regain Ground

By Shuli Ren

Emerging markets currencies can regain ground towards the year-end even as the U.S. election and Federal Reserve’s December meeting are fast approaching, according to HSBC.

The U.S. dollar index seems unable to break the psychologically important 100 level, down to 97.74 overnight after touching a near 2016-high of 98.93 last week.

Recent history shows emerging markets currencies can overcome the Fed’s rate hikes. In fact, last year was worse and emerging markets currencies did just fine.

Source: Barron's Asia

http://blogs.barrons.com/asiastocks/201 ... in-ground/

[winston]

IIF Expects Emerging Mkts to See Net Capital Outflow in 2017

Reuters reported that The Institute of International Finance (IIF) forecasted that the emerging markets (EM) will post net capital outflows of US$206 billion in 2017 for the fourth year in a row, less than US$373 billion expected this year.

IIF said China is the key factor deciding when will the capital flow of EM tick back to positive.

If RMB remained softened against USD, the net capital outflows are likely to continue.

Source: AAStocks Financial News

[winston]

Emerging market bond, currency markets face ‘meltdown’ after Trump's win

by Sri Jegarajah and Leslie Shaffer

Expectations of fiscal stimulus, infrastructure spending and reflationary policies under a Trump administration were fueling inflation fears, sending benchmark U.S. ten-year Treasury yields and the dollar surging.

Expectations for tighter monetary policy and a December rate hike by the Federal Reserve were also playing a role.

"Asian fixed income assets have operated on a 'lower for longer' assumption' for U.S. rates since June," RBS economists led by Vaninder Singh wrote in a note on Friday. "This assumption is being challenged.

High-yielding currencies will have to re-price to become attractive again."

"The thing to watch will be capital flows, as a good amount of money has shifted into EMD [emerging market debt],"

Source: CNBC.com

http://www.cnbc.com/2016/11/14/emerging ... yptr=yahoo

[winston]

3 Reasons Why Hot Emerging Market ETFs Have Caught A Trump Chill

Without open trade, emerging markets face the prospect of more idle factories and slower middle-class growth.

Countries such as Mexico, which is reliant on U.S. trade and remittances from its citizens living in the U.S., could retaliate with protectionist moves too.

Trump is seen as likely to deliver fiscal stimulus in the form of corporate and personal income tax cuts as well as infrastructure spending.

This may give investors additional reason to stay closer to home.

More attractive yields in the U.S. could dry up the flow of capital to emerging markets while bringing more money stateside.

Currencies such as the Chinese yuan and Russian ruble fell this week. The Mexican peso is at a record low. That's not good news for investors in EM funds, who get hurt when the local currency weakens and the fund's returns are translated back into the U.S. dollar.

Source: IBD

http://www.investors.com/etfs-and-funds ... yptr=yahoo

[winston]

Trump Tantrum: Foreigners Sold $1.8 Billion Of Emerging Asia Stocks In One Day

By Shuli Ren

Foreigners net sold $1.8 billion of emerging Asia ex-China stocks last Friday, the latest data from Credit Suisse shows.

Over the past five years, we have only seen so much selling only six times: on February 5, 2014, June 13 and 21, 2013; and August 8-10, 2011.

The June 2013 sell-off was termed Taper Tantrum, when the former Federal Reserve chairman Ben Bernanke first floated the concept of tapering U.S. QE programs.

So let’s coin this Trump Tantrum.

Foreign investors are selling because rising U.S. bond yields mean there are better investment opportunities at home – the U.S. is a reflation story now. Investors are also worried how the U.S.’ protectionist tone will hurt emerging Asia’s growth.

Emerging Asia resumed Friday’s sell-off after the weekend. The small, expensive Southeast Asian countries were hurt the most. Indonesia’s Jakarta Index tumbled 2.8%, Malaysia’s KL Index fell 1.2%, while the Philippines PSI was down 1.4%.

On the currency front, Malaysia’s ringgit fell 1%, the Indonesian rupiah was down 0.5%, and the Philippines peso fell 0.3%.

On Friday, the iShares MSCI Indonesia ETF (EIDO) tumbled 4.6%, the iShares MSCI Malaysia ETF (EWM) slipped 5%, the iShares MSCI India ETF (INDA) dropped 4.5%, and the iShares MSCI Philippines ETF (EPHE) fell 2.9%.

Source: Barron's Asia

[winston]

Where Foreigners Are Exiting Emerging Markets

By Dimitra DeFotis

Foreign investors began to exit emerging market assets before the U.S. election, and they were net sellers in the past six weeks.

Societe Generale currency Analyst Jason Daw writes:

“Emerging markets are on pace to experience the first back-to-back monthly outflows since January-February. A Trump victory is causing investors to re-evaluate their emerging market thesis and the adjustment is being compounded by the surge in the U.S. 10-year yield.

Long dollar positioning is nowhere near where it was in 2015 and early 2016, and if the macro community senses a “trend” developing there is plenty of scope for the emerging market currency sell-off to accelerate.”

SocGen tables below show that in equities over the past 12 months, investors purchased assets in Korea, India and Taiwan, and sales were greatest in South Africa.

In bonds, foreigners have been sellers of Korea, India and Mexico, and buyers in Thailand, Malaysia and Indonesia. But the sales were higher across all markets in October, Daw notes.

Some highlights from SocGen:
1. Foreigners have sold $1.4 billion of Korean equities so far in November, offsetting the inflows that occurred from Sep-Oct.
2. Foreign demand for Chinese bonds has been strong for three straight months.
3. Foreigners have been small net sellers of Indian equities in October and November. They have been net sellers of India fixed income in October and small net buyers this month.
4. Foreigners bought $1.4bn in Brazilian equities in October, offsetting the previous two months of inflows, but so far in November foreigners have sold $700 million of stocks.
5. Foreigners sold a large amount of Turkish bonds in October ($1.2bn), with smaller net outflows evident so far in November.
6. In South Africa, foreigners continue to reduce their bond exposure.

The iShares MSCI Emerging Markets exchange-traded fund (EEM) was up 1.8% in late afternoon trading.

Source: Barron's

http://blogs.barrons.com/emergingmarket ... yptr=yahoo

[winston]

by behappyalways:-

The Emerging Markets' Dollar Problem

Source: Bloomberg

https://www.bloomberg.com/gadfly/articl ... ar-problem

[winston]

Time to Buy Emerging Markets?

By CHRIS DIETERICH

The iShares MSCI Emerging Markets exchange-traded fund, ticker EEM, has fallen 7.2% since Election Day.

Other countries, including Mexico, have fared far worse.

One worry is President-elect Trump’s campaign rhetoric about clamping down on trade. T

The most critical price move that will determine what happens in emerging markets is the dollar, economists and investors say.

The prospect for government spending and fiscal stimulus has triggered higher U.S. bond yields and strengthened the greenback; the flip-side of this weakness has been plunging emerging-market currencies.

For Tim Hayes, a chief global investment strategist at Ned Davis Research, now is the time to buy emerging markets, especially Russia and Brazil. For one thing, he doubts that the recent dollar strength can continue apace.

“Conditions indicate that the bond sell-off is stretched.”

Source: Wall Street Journal

http://blogs.wsj.com/moneybeat/2016/11/ ... yptr=yahoo

[winston]

Emerging markets may submerge again in 2017

In the wake of the election, investors pulled a record US$6.4bil from emerging bond funds tracked by JPMorgan – a full 10% of what had been received year-to-date.

Equity funds shed a third of year-to-date inflows, data showed.

Trump is seen unleashing a trillion dollars of stimulus through tax cuts and infrastructure spending.

That is feeding through to US bond markets, where rising yields are pricing in a jump in inflation.

“We’ve achieved peak globalisation ... If you have a couple of years of this to play out, that's not the best time to be in emerging markets”

The emerging rally earlier this year had coincided with a 5% fall in the dollar index. Since the election, the greenback’s value has risen 5% to 14-year highs.

Higher US yields don’t just reduce the appeal of emerging bonds, they also make it costlier for governments and companies to roll over maturing debt or raise fresh finance.

Haefele is steering clear, calling emerging market bonds “Ground Zero” in the event of additional unexpected US rate rises.

Bonds in currencies such as the rand and the rouble could be at the sharp end of a sell-off. These rebounded this year after three years of losses, with big-name investors such as BlackRock and PIMCO buying back in.

Source: Reuters

http://www.thestar.com.my/business/busi ... n-in-2017/