30
Mar
Emerging markets: Fundamentals continue to improve
PMI and industrial production rising. Inflation normalising. Equity market valuations remain attractive. What are the risks?
Key points
- The American growth engine is driving advances in the rest of the world
- Leading indicators and industrial production are promising
- Inflation is virtually under control in Russia and Brazil, allowing financing conditions to ease
- The positive commodities cycle is supporting the currencies of exporting countries; performances will be positive in USD
- Attractive valuations in terms of 2017 earnings estimates: Russia 6.35x, China 12.84x, Brazil 12.71x
- The risks of an all-out trade war are diminishing, but watch for the US border adjustment tax
- European political vagaries could generate volatility in terms of European emerging market currencies
