高盛-新兴市场-投资策略-短线拉力赛：可交易但不可持续-20181206-23页_1mb

EM Strategy Views Summary

Core Content

This report discusses the current state and outlook for Emerging Markets (EM) assets in 2018, highlighting a short-lived rally that is not yet sustainable. Despite the rally, EM asset classes have generally posted negative returns, and the report outlines the macroeconomic factors influencing this performance.

Main Points

• Weak EM Returns: 2018 is on track to be the second year since the GFC with all major EM asset classes posting negative returns.
• Recent Rally: EM has seen a rally over the past month, driven by perceived Fed policy shifts and potential trade tensions easing.
• Macro Factors Influencing EM:
  • Growth Deterioration: A key driver of EM underperformance, particularly for equities.
  • Fed Policy: US 2-year rates have influenced EM fixed income.
  • Trade Tensions with China: The CNY has been a significant factor for EM equities.
• Sustainability of Rally: The rally is expected to be short-lived (1-3 months) unless growth data significantly improves.
• Historical Context: EM rallies without growth improvement typically last 2-3 months, with the exception of a 5-month rally in 2010 driven by US rate cuts.
• Relative Value Opportunities: The report suggests that relative value strategies, such as MSCI EM vs. MSCI EAFE, are more promising than a broad beta bounce.
• Investment Recommendations:
  • Raise target for MSCI EM to 110 from 106.
  • Raise stop to 101 from 97.
  • Current trading level is at 104.7.
• Performance Outlook:
  • EM equities: Potential for +5% upside.
  • EM local rates: Expected to decrease by 20bp.
  • EM credit: Expected to tighten by 10bp for the largest 19 markets.
• Growth Outlook:
  • EM ex-China growth is expected to improve due to early cycle dynamics, fading negative impulses, and looser policies.
  • Growth data improvement is crucial for a sustainable rally.
• Macro Forecasts:
  • EM growth is expected to improve, with varying rates of growth across countries.
  • Inflation and policy rates are also considered, with some countries showing signs of easing.

Key Information

• Growth Breadth: Very low, suggesting that the rally is limited to a few economies.
• Growth Improvements: Brazil, Indonesia, Chile, Mexico, and Russia are showing signs of improving CAI.
• FX Performance: EM FX has outperformed its beta-implied level, particularly against G-10 peers.
• Valuation and Earnings Growth:
  • EM valuations are generally low compared to historical levels.
  • Earnings growth is expected to improve in the coming years.
• Flow Analysis:
  • EM portfolio investment and foreign flows have been mixed.
  • Mutual fund positioning shows a shift in favor of certain EM assets.
• Financial Conditions:
  • EM financial conditions are improving, with some countries showing better real rates.
  • Credit spreads have widened, suggesting potential value.

Exhibits and Data Highlights

• Exhibit 1: EM assets have been pressured by growth, the Fed, and China trade tensions.
• Exhibit 2: Growth breadth is at its lowest since 2012, indicating a lack of broad-based improvement.
• Exhibit 3: Most EM economies are below their 3-year trend in growth.
• Exhibit 4: EM rallies without growth improvement typically last 2-3 months.
• Exhibit 5: EM FX is outperforming, while equities and local bonds are catching up.
• Exhibit 6: Revised targets and stops for EM based on macro developments.

Conclusion

The report concludes that while EM has experienced a short-lived rally, the sustainability of this performance depends heavily on growth improvements. Relative value strategies are recommended over broad market exposure. The analysis suggests that EM assets may have limited upside unless growth data significantly improves, and the rally is expected to be short-lived.