Emerging Markets – Page 3 – Harlyn Research LLP

New Risk Conditions Indices

Thursday, October 10th, 2019

Equity and bond volatility are behaving inconsistently

This week we introduce four new risk conditions indices covering the equity and government bond markets of selected emerging market and developed countries. They highlight the fact that the relationship between equity and bond volatility is abnormal, given their recent relative performance.

Filed under: Categories: Emerging Markets, Equities, Government Bonds, Volatility

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Show Me the Damage

Thursday, May 16th, 2019

EM equity weakness may cause FX volatility to surge

So far, most of the damage inflicted by US/China trade tensions has been on EM Equities. Our models suggest they peaked over a month ago and there is no support until we get well into underweight territory. The danger is that equity weakness turns into FX volatility, affecting EMs and DMs. We know this is always dangerous for risk assets in general.

Filed under: Categories: China, Emerging Markets, FX rates, United States, Volatility

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Time to Get Fussy

Thursday, March 21st, 2019

Be selective in EM Equities

Indiscriminate buying of any and all emerging market equities worked well from Q4 2018 to Q1 2019. We now see signals that it is time to be more selective. We have just put four EM countries on our negative watch list, and we will have to rely much more on index heavyweights like India, China and Taiwan if the region is to continue to outperform. The region also faces renewed competition from certain “cheap” European countries.

Filed under: Categories: China, Emerging Markets, Equities

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Little Ray of Sunshine

Wednesday, December 5th, 2018

Invest in EM Equities without changing your risk profile

Our models are de-risking as fast as they can, with one exception – emerging market equities. Our individual country analysis suggests that high-quality emerging markets are becoming more attractive than high-quality developed markets and that high-risk EMs are doing the same versus high-risk DMs. Investors can make the switch from DM to EM without changing their short-term risk profile. This doesn’t happen very often.

Filed under: Categories: Emerging Markets, Equities, Risk-Adjusted Returns

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Alternatives to Santa

Thursday, November 8th, 2018

How not to chase the Christmas rally

Investors should feel free to trade a Christmas rally in equities, provided they can identify when to take profit. Our US sector model is firmly in de-risking mode, which means that an extended rally is unlikely. Investors can profit from this correction by adding exposure to EM Equities, buying either an index ETF or selecting from our list of preferred countries.

Filed under: Categories: Emerging Markets, Equities, Market Timing, Seasonality, United States

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Europe Can Set the Agenda

Wednesday, August 1st, 2018

EM assets are already attractive in euros

Because of the strong dollar, European investors have a chance to buy emerging market exposure without competition from US investors. EM Bonds already offer attractive risk- adjusted returns when measured in euros or pounds. There may also be an opportunity in selected equity markets like Mexico, India and Israel, even if the overall index is unattractive because of its large exposure to China and the threat of a trade war.

Filed under: Categories: Emerging Markets, Equities, FX rates, Government Bonds

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Red Flags

Wednesday, July 4th, 2018

Emerging Markets, the Renminbi & Eurozone Banks

Our recommended underweights for Eurozone Financials and EM Equities are at the sort of levels we saw just before major crises such as 2008 and 2010-12. We think that both can be traced back to tightening financial conditions and restricted dollar liquidity. What concerns us is that neither the Fed and the ECB are prepared to admit there may be a problem or that these two themes could feed off each other. We also worry that further devaluation of the Chinese renminbi could put additional pressure on EM Equities and bring a potential flashpoint closer.

Filed under: Categories: China, Emerging Markets, Eurozone, FX rates, Global Equities

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A Selection of Emerging Markets

Wednesday, January 31st, 2018

These may help to mitigate dollar volatility

Despite our worries in late November, EM Equities have done well, but we still need to be selective. In Asia, we like China, Thailand and Singapore and have put Malaysia and Indonesia on the positive watch-list. We don’t like Latin America at all, and prefer Austria as the play on Eastern Europe. This leaves South Africa and India, two BRICS, which have interesting upside, if the politics turn out right.

Filed under: Categories: China, Emerging Markets, Geo-Political Risk, Global Equities

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What next for EM?

Thursday, November 23rd, 2017

Structural change and a general underweight

Three key messages for EM equities. (1) We expect to be underweight by early Q1 2018. We are already underweight EM in fixed income. (2) EM equities are not behaving like a single asset class at present. Only specialists should attempt to pick favourite countries. (3) The inclusion of China A shares in the main EM indices will force investors to rethink the way they allocate money, and they will be underweight while they work out what to do.

Filed under: Categories: China, Emerging Markets, Equities, Government Bonds

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Actions Speak Louder than Words

Wednesday, October 4th, 2017

Investors are positioning for more dollar strength

Across a broad spread of asset classes and strategies, investors have responded to recent dollar strength by putting on a series of trades which suggest they expect it to continue. This doesn’t prove that it will, but the market reaction has been consistent and immediate.

Filed under: Categories: China, Commodities, Emerging Markets, Eurozone, FX rates

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