Wall Street Views Emerging Market Rout as a Buying Opportunity

Emerging-market equities are sinking and the U.S. dollar is routing developing-nation currencies to an extent not seen since right afterDonald Trump’s shock election.

This time, it’s the U.S. president’s plan to dramatically cut tax rates for businesses that’s causing the undoing.  Managers and strategists, including JPMorgan Chase & Co., UBS Wealth Management and Standard Life Investments Ltd. say this time is different. Shares in developing nations are just pulling back after a 27 percent rip over the first nine months of the year.

"It’s more a bump in the road than a different road," said Kieran Curtis, who helps oversee $5 billion in emerging-market debt at Standard Life in London and favors the Mexican peso, Indonesian rupiah and Malaysian ringgit. "It’s not clear that the tax plan will cause a massive dollar bull trade. Spending is good for growth in the U.S. as well as EM."

Here are other reasons why emerging-market assets have room to go higher:

Real rates remain high in many nations and some countries such as Brazil and Russia have room to cut rates despite Fed tightening

Average earnings per share is up 18 percent this year with margins still in early stage of recovery
Developing-nation stocks have only recouped one-third of the outflows they suffered from 2013 to 2016

Source: Bloomberg Pro Terminal

Trader I. Ivanov

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