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Bailey McCann, Opalesque New York:

Emerging markets have been under significant pressure since the start of the year, but there are some nascent trends that suggest that things could be getting better. Emerging markets firm Gramercy Fund Management recently released its third quarter outlook and it highlights a base case that may provide battered emerging markets investors some solace.

Gramercy expects that the major themes of inflation, the war in Ukraine, and the risk of a "stop and go" economic environment in China will continue to rattle markets. Tighter sanctions against Russia are also likely to keep energy prices high despite monetary tightening and weakening demand. The war in Ukraine will also continue to have an impact on food prices with prices likely to remain high over the near term.

"We are skeptical about the prospects of recent international efforts brokered by Turkey to relax Russia's naval blockade of Ukraine's Black Sea ports and do not expect a significant improvement in Ukraine's (and Russia's) ability to normalize food/fertilizer exports as long as the military conflict is ongoing," the research note says.

Despite these negative factors, Gramercy has identified several pockets of opportunity. For Q3 the firm is focusing on countries and companies that are benefiting from commodity exports. The credit universe also offers a variety of opportunities according to the note. Now that interest rate risks are largely understood by the market, G......................

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