Re-Assessing Emerging Markets: What Now?

by Michael J. Howell4. July 2018 16:37

As Global Liquidity conditions tighten further, we accept that the next few months will prove more challenging for Emerging Markets. Credit is a particular problem and the downside risk is that EM debt spreads could add a further 200bp versus US Treasuries. However, a positive note is that EM domestic fundamentals look far better than during previous crisis periods. In particular, net capital inflows appear surprisingly firm in contrast to recent Press reports. In sum, the EM outlook is poor largely because of external factors, but domestically it does not look a disaster.


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