Goldman Sachs International is becoming more cautious on the view that the acceleration in EM economic growth can continue through 2H 2017 and recommends investors explore relative value opportunities across assets in developing nations more than take beta exposure, analysts Caesar Maasry and Jane Wei write in note to clients dated Friday.
While co. is confident EM economies will do better relative to DM economies in the coming 1-2 years, recent changes in DM growth dynamics, financial conditions and commodity prices are likely to weigh on EM growth in coming months.
Since late 2016, EM has been in expansion phase, which has favored stocks and credit, but a negative growth impulse could push EM into slowdown phase, which would cause return profiles to fall across risky assets and may bring carry trades (FX and local bonds) into vogue over equities and credit Co.’s models suggest Russia is one of the most at-risk EMs in terms of a further growth deceleration; other commodity EMs such as Brazil, Malaysia and Chile may face decelerating current- activity indicators in coming months, while Turkey, Poland, Czech Republic and Hungary appear most resilient.
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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