Is it time for Emerging Markets to shine?
Capital has been leaving Emerging Markets (EMs) in recent years, driven by the prospect of higher interest rates in the US and lower growth expectations. But now, there appears to be a fundamental change occurring in emerging markets. After years of underperformance, the outlook is brighter. Valuations are more attractive and capital flows may be turning around. Is it too early for asset allocators to commit again to emerging markets?
Here, we highlight some recent white papers that seek to explain the indicators - the signposts - that investors need to see, in order to believe that capital should be committed to the asset class.
Have Emerging Markets bottomed? The signs to look for (Nikko AM, May 2016)
In this paper, Nikko Asset Management portfolio managers examine the factors that, in their view, need to be present for capital outflows to be stemmed and for a sustainable recovery in EM assets to develop.
Other papers on a similar theme:
Time to revisit Emerging Markets Debt (JP Morgan, Apr 2016)
This report by JP Morgan's Emerging Market Debt CIO Pierre-Yves Bareau outlines the key findings from a recent discussion with his colleagues examining emerging market capital flows and sovereign debt levels, relative to Developed Markets and history.
China: Mounting Macro Paradox (KKR, May 2016)
China accounts for almost a third of total worldwide GDP growth. This paper, by KKR Asset Management, provides insights into the country's economic prospects following a visit of its senior investment teams to the country.
An Examination of Emerging Markets Sovereign Defaults (Lazard, May 2016)
The authors of this paper examine (using historical data) whether creditor concerns about a new wave of Emerging Market (EM) sovereign defaults are justified. They examine whether the current global environment could indeed lead to more defaults in EM economies.
EM Insights: Emerging Recovery (Goldman Sachs, Apr 2016)
This paper brings together views from across Goldman Sachs Asset Management on the recovery in Emerging Market economies. The conversations summarised here cover capital flows, the trends guiding them and the case for strategic allocations to EMs.