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CoreMacro | Emerging Markets
Emerging Markets research - including in-depth country reports. Typically published four times a month.
Core Europe’s industrial sector will relapse in the coming months due to US tariffs and a strong euro. Investors can play the imminent deflationary shock by being long Central European bonds. They should, however, hedge the currency risk vis-à-vis the euro.
The Buenos Aires election results are a setback for the government's political momentum, but not the endgame. Our long-term bullish view remains in place, but short-term investors should stay on the sidelines in the near run.
We see two risks that could spoil the rally in US risk assets: (1) a tariff-driven stagflation, and (2) a US Treasury tantrum. Our negative view on EM risk assets is primarily driven by the outlook for global trade, which is set to shrink in Q4 this year.
EM sovereign and corporate credit spreads are set to widen. Within a global credit portfolio, maintain a neutral allocation to EM credit markets versus US corporate credit. Favor EM local currency bonds over EM USD bonds.
Colombian markets will be torn between expectations of future orthodox policies and the reality of a worsening macro backdrop in the next 12 months. To balance risks, we are upgrading Colombian equities, local bonds, and sovereign credit from underweight to neutral versus their respective EM benchmarks.
US TMT stocks have been delivering miraculous profit performance. Yet, outside US large tech, global equity fundamentals and technicals are troublesome. A near-term USD rebound should be faded.
A deflationary shock from shrinking exports will ripple throughout the Korean economy. We are downgrading the KOSPI from overweight to neutral and reiterating a long position in 10-year domestic bonds, currency unhedged.
A high US tariff and the lingering uncertainties on the US-India trade deal will hurt investors sentiment. This and contracting corporate profits will push share prices lower. Stay underweight Indian stocks.