日韩精品久久一区二区三区_亚洲色图p_亚洲综合在线最大成人_国产中出在线观看_日韩免费_亚洲综合在线一区

Global EditionASIA 中文雙語Fran?ais
Business
Home / Business / Policies

Emerging market assets shine amid rising inflation, strong growth

By Patrick Zweifel | China Daily | Updated: 2021-06-28 09:27
Share
Share - WeChat
Workers check steel product quality at a unit of Magang Group in Ma'anshan, Anhui province. [Photo by LUO JISHENG/FOR CHINA DAILY]

After emerging markets' (EMs') strong run over the past year, two big worries confront investors.

First, there is a likelihood that over the next six quarters or so, emerging economies will underperform their developed counterparts-a rarity in recent history.

Second, US Treasury yields seem poised to rise, a factor that can unsettle markets more generally.

Over the coming quarters, developed market economies are set to outgrow emerging market economies. At the same time, there is the risk of rising US Treasury bond yields-and since these represent the market's risk-free rate, such a move would tend to portend ill for other assets.

Normally, either of these factors might suggest that EMs' fortunes are likely to turn. But not now. That's because the economic environment looks set to stay very favorable for EM assets.

EM asset classes perform best in periods of high inflation and strong growth. Indeed, they are among the best performing of all asset classes. In periods since 1950 when global inflation was above 2 percent and rising, and global GDP growth was above its four-year average, EM equities were significant outperformers in a list of 25 major asset classes, generating average annual returns of well above 20 percent.

It's rare for developed markets to expand faster than emerging economies during periods of generally strong economic growth. But there was one such period in 2010, and in that instance both EM bonds and equities did well-local currency debt returned an annualized 12.7 percent while the MSCI Emerging Markets Index generated a return of nearly 19 percent, outperforming developed markets by more than 6 percentage points.

The more significant issue is whether emerging economies will continue to grow strongly, rather than whether or not developed markets do better. And here the data are positive. Our forecasts suggest the world is entering one of these favorable high-inflation, strong-growth environments in which EM assets flourish.

The four main drivers of emerging economy growth are all favorable: global trade is booming; as are commodities; China remains robust; and the US dollar looks destined to weaken (which is also a plus).

Real exports were already back to their long-term average in February, rising 5.2 percent on the year-and this has almost entirely been an EM story.

EM exports were up 17 percent in the first two months of the year-those in developed markets actually shrank slightly-and are now 9 percent above pre-pandemic levels.

That trend looks set to continue. Our global trade indicator suggests this will be the strongest cycle in almost 30 years, thanks to extraordinary levels of US fiscal stimulus, a boom in investment spending, thanks to rising corporate profits and the fact that China's recovery is becoming more domestically driven and therefore has triggered a rise in imports.

Global demand points to a double-digit rise in commodity prices over the coming 12 months. The US government's American Jobs Plan alone is expected to deliver some $1.3 trillion in direct demand for commodities. What's more, commodities are likely to benefit from their status as inflation hedges if the upward trend in consumer price remains sticky.

The nature of China's expansion should continue to be supportive of emerging economies generally. That's because China has been shifting from last year's exports-driven surge to being more domestically focused, which, in turn, should keep driving import demand-for example, imports of copper and iron are 33 percent and 78 percent above trend respectively.

And finally, we expect the US dollar to weaken, giving a further boost to commodity prices and also reducing emerging borrowers' debt servicing costs.

There does not appear to be any reason for EM currencies to depreciate at this point in time.

Strong US growth and higher inflation are likely to drive US Treasury bond yields higher, especially those with longer maturities. Investors worry that these rising yields will hurt risky assets everywhere. That, however, is not the situation now.

Typically, rising US yields would drive up the cost of borrowing for emerging economies, which then tends to hit their currencies. Eventually, this currency depreciation restores competitiveness and leads to higher exports, and thus stronger growth, which makes it easier for them to service their debt.

This was the adjustment mechanism that was triggered in the wake of the 2013 US taper tantrum, when the US Federal Reserve's decision to pare back its quantitative easing program caused ructions across global markets. This is why, in past periods when rising US yields coincided with soft EM growth, EM assets tended to underperform by a significant amount.

This time, however, growth in emerging economies remains strong, which means there is no reason for EM currencies to depreciate and thus cause a panic among foreign investors. In fact, historically, the best environment for EM assets was when emerging economies were generating strong growth at a time of rising US bond yields.

EM currencies are no different from other EM assets in terms of how they perform in different economic environments. Weak growth at a time of rising US yields is associated with currency depreciation.

Strong growth, even in an inflationary environment, leads to appreciation, particularly in the case of Asian and Latin American currencies.

The views don't necessarily reflect those of China Daily.

The writer is chief economist at Pictet Asset Management, a Swiss firm with $252 billion worth of assets under its management as of Dec 31, 2020.

Top
BACK TO THE TOP
English
Copyright 1995 - . All rights reserved. The content (including but not limited to text, photo, multimedia information, etc) published in this site belongs to China Daily Information Co (CDIC). Without written authorization from CDIC, such content shall not be republished or used in any form. Note: Browsers with 1024*768 or higher resolution are suggested for this site.
License for publishing multimedia online 0108263

Registration Number: 130349
FOLLOW US
CLOSE
 
主站蜘蛛池模板: 韩国资源视频一区二区三区 | 99久久99 | 天天艹天天 | 久久亚洲AV成人无码电影A片 | 日本一区二区三区视频在线观看 | 在线视频 中文字幕 | 亚洲一区二区欧美日韩 | 国产精品久久久久久喷浆 | 99久久精品国产一区二区三区 | 妖精视频永久在线入口 | 一区二区三区在线 | 日韩一级片在线免费观看 | 国产精品视频二区不卡 | 欧美激情一区二区三区视频高清 | 亚洲成a人片在线看 | 奇米影视7777久久精品人人爽 | 久久精品二区 | 日本一本久道 | 日日夜夜免费精品视频 | 欧美性一区二区三区 | 日日日bbb | 亚洲成人日韩 | 日韩精品一区二区三区中文字幕 | 日韩亚洲欧美视频 | 日韩亚洲欧美在线爱色 | 久草网站 | 夜夜操狠狠操 | 欧美黑人疯狂性受xxxxx喷水 | 国产 一区 | 久久97精品久久久久久久看片 | 亚洲人人 | www.精品| 香蕉视频免费网站 | 国产一区二区三区在线视频 | 久久香蕉国产精品一区二区三 | 亚洲午夜无码毛片AV久久 | 日韩欧美国产视频 | 免费看香港一级毛片 | 一区二区三区高清在线 | 91视频社区 | 久久综合一个色综合网 |