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Alternative Market Briefing

Comment: Emerging Markets - The Clouds Lift

Wednesday, March 29, 2017

Matthias Knab, Opalesque:

PIMCO writes on Harvest Exchange:

As 2017 progresses and the priorities of the Trump administration take shape, the outlook for emerging markets (EM) has evolved from uncertain to promising.

What has changed so quickly? Several important concerns that weighed on the sector since late last year have subsided, allowing the relatively strong fundamentals in many EM countries to shine and driving an impressive recovery in EM bonds.

Initially, emerging market assets bore the brunt of investors' fear of protectionist policies after the U.S. election. Now, as the new administration sets its agenda, developed markets (DM) are once again at the epicenter of global worries. Investors are wondering about the likelihood and size of U.S. fiscal stimulus and/or tax cuts. Europe faces a number of imminent political tests: French presidential elections in late April/early May and parliamentary elections in June, German elections in September, Italian elections likely sometime in 2017, and ongoing negotiations over Brexit. Topping that off is uncertainty over the $6 billion in Greek bonds coming due in July.

The Fed factor

Investors were also concerned about the pace of interest rate rises from the Federal Reserve and the impact on EM capital flows. Now, the markets have calmly priced in expectations for three Fed hi......................

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