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1 Apr 2016
EM assets remain well supported – Deutsche Bank
Research Team at Deutsche Bank, suggests that the removal of the risk of a front-loaded cycle in the US continued to spill over across FX and local curves – with the exception of Brazil, on more hawkish Central Bank statements.
Key Quotes
“In most cases, risky assets have retraced to where they were before the sell-off of last December - driven mainly by fears of a more aggressive tightening in the US. While reduced EU and China risks have also favoured retracement across EMFX, EM currencies have been roughly stable vs. The EUR and recent strength reflects mainly USD weakness.
While we see no catalyst for a sell-off in the near term, which should continue to favour duration and high-yieders, EMFX performance continues to hinge on the prospect for commodity prices and equities – as proxies for growth. Also, as valuation across credit and local curves is less appealing idiosyncratic factors could play a larger role in return attribution for now. Overall, the focus shifts to underlying economics, politics, and local central banks and away from major central banks.”
Key Quotes
“In most cases, risky assets have retraced to where they were before the sell-off of last December - driven mainly by fears of a more aggressive tightening in the US. While reduced EU and China risks have also favoured retracement across EMFX, EM currencies have been roughly stable vs. The EUR and recent strength reflects mainly USD weakness.
While we see no catalyst for a sell-off in the near term, which should continue to favour duration and high-yieders, EMFX performance continues to hinge on the prospect for commodity prices and equities – as proxies for growth. Also, as valuation across credit and local curves is less appealing idiosyncratic factors could play a larger role in return attribution for now. Overall, the focus shifts to underlying economics, politics, and local central banks and away from major central banks.”