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Tailwind for Emerging Markets

19 August 2016 by pdonnat

Looking and exploring the emerging market machine’s cluster of DataGrapple, we observe the impressive trend of emerging markets performance since February this year, Venezuela excepted. With 10Y Treasuries anchored under 1.60%, the investors’ concern on Emerging Market keeps easing. According to Bank of America, with 20BUSD of positive inflows over the past 7 weeks, the Emerging Market debt funds keep attracting investors. The largest strike on record. On the equity side, we have the same trend, 7 weeks of inflows with a total of 15BUSD. Investors are chasing yield and growth. Shorting the emerging market risk with CDS looks risky, there is more room to trade back to 2014 levels, Brazil CDS is still trading at 250 for a 130-150 range in 2014. However, Asian and East European countries are trading at the tightest or close to their tightest level over the last 3 years. We can be close to the final leg of the EM CDS tightening.