Is the EM rally fizzling before it got out of the blocks?
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Morgan Stanley uses copper to argue that MSCI EM has achieved all its gains for the year. It points out the strong correlation between EM and the copper price.
In recent weeks, some commentators have been suggesting the copper, wheat, iron, corn price surge of 2020 was related to Yuan appreciation and Chinese stock-building – and as Yuan appreciation has largely stopped – so should the price surge in these commodities. Its too early to be categoric about it – but copper, wheat, corn all seem to have topped out.
But that doesn’t mean MS is right to say the year is done for EM. The MS target of 1,330 for the year might have already been met, but Dan Salter’s target is 1,513 which leaves a lot of upside.
Charles Robertson, Global Chief Economist, Renaissance Capital, wrote a note yesterday saying that some of the gains might be had in the smaller markets – from SA – which has won a record $1bn investment into its car industry yesterday (he targets a R14/$ for end-2021), or Turkey where the currency is remarkably cheap (he can see it getting to 7/$ in the short-term), or Brazil where the currency could get some much needed support via a few Selic rate hikes over the coming year or so. And Russia, which is bouncing off the excessive fall of recent days.
There’s a Bloomberg story on Emerging markets about cheap EM currencies using the Big Mac survey – which supports this point.
For now The animal spirits continue to soar into February
Chris Holdsworth, chief investment strategist at Investec Wealth and Investment, speaks to Michael Avery about the latest Covid numbers, commodities pulling back and the reason to pick your hedge funds carefully.
In recent weeks, some commentators have been suggesting the copper, wheat, iron, corn price surge of 2020 was related to Yuan appreciation and Chinese stock-building – and as Yuan appreciation has largely stopped – so should the price surge in these commodities. Its too early to be categoric about it – but copper, wheat, corn all seem to have topped out.
But that doesn’t mean MS is right to say the year is done for EM. The MS target of 1,330 for the year might have already been met, but Dan Salter’s target is 1,513 which leaves a lot of upside.
Charles Robertson, Global Chief Economist, Renaissance Capital, wrote a note yesterday saying that some of the gains might be had in the smaller markets – from SA – which has won a record $1bn investment into its car industry yesterday (he targets a R14/$ for end-2021), or Turkey where the currency is remarkably cheap (he can see it getting to 7/$ in the short-term), or Brazil where the currency could get some much needed support via a few Selic rate hikes over the coming year or so. And Russia, which is bouncing off the excessive fall of recent days.
There’s a Bloomberg story on Emerging markets about cheap EM currencies using the Big Mac survey – which supports this point.
For now The animal spirits continue to soar into February
Chris Holdsworth, chief investment strategist at Investec Wealth and Investment, speaks to Michael Avery about the latest Covid numbers, commodities pulling back and the reason to pick your hedge funds carefully.