Emerging Markets 03 (Sep 16 - Dec 24)

[winston]

Traders Fear Hard Landing in Emerging Markets

By Natasha Doff

Carry-trade exit in EM is ‘quite small’: Schroder’s Olu-Pitan
Benchmark BlackRock bond ETF has doubled in size this year

The iShares JP Morgan EM Local Government Bond ETF, ticker IEML, has doubled in size this year, mopping up more than $3 billion of inflows as investors reach for average yields as high as 4.72 percent in developing economies.

Such a selloff could be triggered by higher developed-world yields as central banks wind down easy monetary policy, like in 2013’s Taper Tantrum. That would dim the appeal for carry traders of borrowing dollars to buy assets in higher-yielding developing world currencies.

Source: Bloomberg

https://www.bloomberg.com/news/articles ... gn=markets

[winston]

Wall Street Vets From Dalio to Gundlach Warn on Emerging Markets

By Ben Bartenstein

Emerging-market valuations ‘fairly full,’ Janus Capital says
North Korea, Venezuela and U.S. debt ceiling all seen as risks

Among the assets under scrutiny are emerging-market bonds, which for only the third time in history are yielding less than U.S. junk debt.

“Valuations in all risk markets, including EM, are fairly full in our view and this would be a reasonable time to reduce risk.”

Source: Bloomberg

https://www.bloomberg.com/news/articles ... yptr=yahoo

[winston]

Emerging Market Stocks Set to Close August on Fire

August is their eighth straight month of solid gains.

by Kinsey Grant

As U.S. stocks have struggled to find solid ground in August amid geopolitical turmoil with North Korea and devastation following Hurricane Harvey, emerging market stocks continue to rise.

August was the eighth-straight month of gains for emerging market stocks.

The iShares MSCI Emerging Markets ETF (EEM) has risen sharply since the start of this year, up nearly 30%. The S&P 500 Index has gained 9.7%.

The emerging markets ETF hit a 52-week high last Friday, likely because political uncertainty in the U.S. and a subdued dollar have made emerging markets, which have broadly improved their economic growth prospects this year, more appealing.

Source: The Street

https://www.thestreet.com/story/1428993 ... yptr=yahoo

[winston]

BANK OF AMERICA: One area of the stock market could double in the next 2 years

by Joe Ciolli

Based on comparisons to past bull-market stretches, Em Equities has historically risen roughly 230% during expansion periods that last 42 months on average.

Asian EM stocks — which have exploded by 60% since the start of 2016, outperforming global equities by 27% — could continue to thrive until they're faced with a recession or with valuations that extend to a price-to-book ratio of three times.

He says investors should be overweight Korea, China, Taiwan, and Turkey, in decreasing order of confidence.

Source: Business Insider

https://finance.yahoo.com/news/bank-ame ... 00544.html

[winston]

Emerging markets better placed to cope with the ‘great unwind’

Investors’ ferocious appetite for emerging market assets – cumulative inflows into emerging market bond and equity funds so far this year have surged to US$136 billion, three times the inflows for the whole of 2016.

This year’s dramatic 29 per cent rise in the MSCI Emerging Market Index, the leading equity gauge for developing economies, has pushed valuations (as measured by the forward price-to-earnings ratio) to their highest level since the start of 2010, according to Bloomberg.

Emerging market shares are no longer trading at a hefty discount to their developed market peers, and are now only slightly cheaper than European equities.

Only 14 per cent of emerging market sovereign debt outstanding is now denominated in foreign currencies, reducing the risk of a financial crisis stemming from a sharp decline in local currencies.

Global asset prices are dangerously dependent on “the very low bond yields that have prevailed for so long.”

A sharp rise in yields stemming from a faster-than-expected removal of stimulus, or a major policy blunder by the Fed or the ECB, could put emerging market assets under significant strain.

Source: SCMP

http://www.scmp.com/business/article/21 ... eat-unwind

[winston]

Best ETFs to Buy for the Santa Rally: Vanguard FTSE Emerging Markets (VWO)

Don’t look now, but emerging markets are once again hot. Since the global credit crisis and economic slowdown, many emerging markets have floundered due to a number of factors. But with the U.S. dollar falling and commodity prices finally rising, many emerging market nations are starting to reemerge once again.

And that could make the broad-based Vanguard FTSE Emerging Markets ETF (NYSE:VWO) one of the best ETFs to buy for the fourth quarter.

When it comes to emerging market ETFs, VWO is a behemoth in the sector- with $62 billion in assets. And it’s easy to see why. The ETF tracks 4,655 different emerging market stocks from nations such as Brazil, Russia, India, Taiwan, China, and South Africa. That’s diversification that can’t be beaten.

And as a Vanguard ETF, VWO is dirt cheap to own. Expenses for the fund are a paltry 0.14%. When you add that low expenses to its robust trading volume and you have a recipe for emerging market success.

With developing markets starting to heat-up, VWO’s success in the fourth quarter could almost be assured. For investors, the ETF needs to be part of any portfolio.

Source: Investor Place

[winston]

Under-Owned Emerging Market Stocks Have 'Very Attractive' Valuations: Strategist

Both stocks and bonds in emerging markets have lured back a great deal of outflows over the past few years.

by Kinsey Grant

Emerging markets stock funds have lured back in about 40% of the money that flowed out of the funds between the second quarter of 2013 and the end of 2016, EPFR Global data showed.

Bonds in emerging market funds have earned back even more than they lost.

Aviva Investors rates equities in emerging markets "overweight" on "very attractive" valuations.

Global growth, moderate inflation and only slightly tightening U.S. monetary policy position developing nations' equities well for future success.

Source: The Street

https://www.thestreet.com/story/1431935 ... yptr=yahoo

[winston]

Emerging markets to lure over $1 trillion in foreign investment in 2017: IIF[/b]

by Dion Rabouin

NEW YORK (Reuters) - Emerging markets will draw $1.1 trillion of capital flows from non-resident investors this year, the Institute of International Finance said in a report released on Tuesday, ramping up its estimates from earlier this year as a result of increasing global risk appetite and economic growth.

It will mark the first time since 2014 that the asset class will see more than $1 trillion of capital flows from foreign investors. The group also projects investment will grow to $1.2 trillion in 2018 as growth continues.

“With global growth broadly based and inflation still subdued, global risk appetite has been near post-crisis highs,” said Hung Tran, IIF’s executive managing director.

“Moreover, growth is accelerating more quickly in emerging markets than in mature markets — typically a big pull factor for EM investors.”

Tran also noted that stronger-than-anticipated portfolio inflows to debt, equity and banking helped drive the group’s upward revision from $970 billion projected in June.

That projection was $290 billion higher than its first estimate this year in February, shortly after U.S. President Donald Trump took office. The organization listed possible American protectionism as its top threat to emerging market portfolio flow growth.

This marks a recovery to 4 percent of emerging market gross domestic product (GDP) from just 1.5 percent of GDP in 2015, IIF noted in the report, though that is still well below the pre-crisis peak of 9 percent of GDP.

Nearly all components that make up capital flows have risen in 2017, led by the doubling of portfolio debt inflows. Monthly portfolio inflows averaged $23 billion in the first nine months of 2017, almost double the $12 billion per month average during the same period in 2016.

“With EM external debt issuance at record highs and search-for-yield flows still a big factor, we expect portfolio debt inflows to rise from $102 billion in 2016 to $242 billion in 2017,” Emre Tiftik, IIF’s deputy director, global capital markets, said in the report.

Capital inflows from non-residents had fallen to a 12-year low in 2015.

Another major reason for the increase is the large reduction in emerging market resident outflows, mainly from China. IIF now anticipates 2017 will see net total emerging market inflows.

Outflows from China, the world’s second-largest economy, which leads EM economies in capital leaving local markets, rose to a record $725 billion last year.

Source: Reuters

http://www.reuters.com/article/us-emerg ... US%20Money

[winston]

Why This Stock Bear Sees No Hope for Emerging Markets

By Ben Bartenstein

Smith says few attractive bets in authoritarian regimes
Ecstrat favors nations with low exposure to commodities, China

Source: Bloomberg

https://www.bloomberg.com/news/articles ... gn=markets

[winston]

Emerging Market Stocks: Reasons to Be Bullish

By Adam Routh

The MSCI Emerging Markets index has gained 32% so far this year on the back of strong corporate earnings and attractive valuations and Barings says the rally has room to run.

Profit margins are beginning to recover as productivity growth outpaces real wage growth—investment in labor-saving equipment and a renewed focus on cost management have made a significant impact.

Sales performance is also beginning to improve, due to accelerating real GDP growth across emerging markets and rising inflation in many countries.

As a result, consensus earnings expectations for 2017 and 2018 have broken the pattern of the previous five years and have exhibited a steadily rising trend.

This translated into positive earnings growth in 2016, and for the first time since 2011 we see earnings growth in 2017 materially accelerating.

Source: Barron's

http://www.barrons.com/articles/emergin ... 1510112888