TSS - Emerging Markets Report, April 2015 - At Last More Money Arrives: Back To EM

World investors have two masters: America and China. Emerging Markets are caught between the two. Four years of strong US Liquidity have underpinned the more US-linked markets, like Mexico, Israel and the Philippines, but previously tight Chinese Liquidity has hit many others, such as China directly and Brazil. India may uniquely stand apart. Our data show that these extremes may be changing places. US Liquidity is sliding (underscored by the threat of a mid-year Fed tightening): China’s PBoC is definitively easing, with the only doubt about the speed of both. Who will be the more aggressive? Our money is on China, since the Fed is likely unable to tighten much anyway given the nervous state of the economy. Note that the PBoC is now the World’s largest Central Bank (one-fifth bigger than the US Fed) and its liquidity has a major impact both domestically and regionally.