Goldman Sachs has reduced its "overweight" exposure to assets in emerging markets today amid mounting tensions between the US and China.
"We have reduced our overweight exposure to EM currencies and EM debt until there is clarity about the future relationship between the US and China and global growth, which are linked," Goldman Sachs Asset Management (GSAM) said.
Cash flows in EM markets depend on cheap Fed capital and only very sensitive to a change in US monetary policy. Add internal factors such as high current account deficit, weak currencies and dependence on commodities, these markets become a risky investment.
High risk may also bring higher returns, but the MSCI Emerging Market Index has fallen by more than 11% over the 12-month period. At the same time, the main stock indices down by more than 3%.
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