Gold investment newsletters12/9/2023 Yet as an investment opportunity, the AI mega force may be bigger within DM, supporting revenues and margins across sectors. That push includes the making of semiconductors – the technology powering artificial intelligence (AI) and a key part of major EM tech sectors. and other DM efforts to reshore production closer to home. Some, like Mexico, could benefit from U.S. That includes oil from the Gulf states India’s chemicals and industrial manufacturing South Korea’s battery and memory supply chain businesses Indonesia’s nickel and cobalt and Chile’s lithium. We prefer EM bonds and stocks as we see a rewiring of supply chains benefiting select countries that offer valuable commodities and supply chain inputs. We also think lower credit ratings in EM hard currency debt are priced in given that yields are at a near 14-year high versus local currency bond yields, Refinitiv data show. Morgan indexes, and it could benefit from the rewiring of globalization. Hard currency debt is more diversified than local currency, based on J.P. dollars and thus cushioning returns from any local currency weakness – looks more attractive. Rate cuts seem largely priced in and could put downward pressure on EM currencies, dragging on local currency returns.ĮM hard currency debt – issued in U.S. We began to reassess our view on local currency in July: Yields have fallen closer to U.S. We had been overweight EM local currency debt since March on attractive yields from EM central banks nearing the end of their hiking cycles and a broadly weaker U.S. We flip our overweight to EM local currency debt to neutral and turn overweight EM hard currency debt on a six- to 12-month tactical horizon. We put our new playbook in action again by gauging what’s in the price. Yet they’re not immune from a sharp hit to risks assets, in our view. Some have started to cut policy rates, like in Chile and Brazil. That’s partly due to EM central banks nearing the end of their rate hiking cycles. We think EMs are relatively better positioned to withstand some of this volatility. Treasury’s sizable borrowing needs put a spotlight on the challenging U.S. DMs are experiencing bouts of volatility and we see risk of more. We see this shift in priorities accelerating the rewiring of supply chains as nations aim to bring production closer to home. All this favors selected EMs, in our view.Īgainst that structural backdrop, we also favor broad EM exposures over DMs in the short term. As global fragmentation plays out, countries and companies are increasingly prioritizing security and resiliency – through industrial subsidies, export controls and other tools – over maximum efficiency. Multi-aligned nations are set to grow in power and influence, and we expect many major EMs to fall into this camp. We see a world of fragmentation ahead: Competing defense and economic blocs are emerging. Yet trade as a share of global GDP has plateaued (orange line) since the 2008 global financial crisis – one sign that globalization is under pressure. Read details: Trade activity between nations dipped between World War One and World War Two (yellow shaded area in chart) before surging in the decades after World War Two as globalization took shape. We get granular in emerging market stocks. We flip our overweight to EM local currency debt to neutral and turn overweight EM hard currency debt instead on a six- to 12-month tactical horizon. We assess what’s in the price as we pivot to new opportunities. That push includes the production of semiconductors – the technology powering artificial intelligence and a key part of major emerging markets tech sectors. Some countries, like Mexico, could benefit from developed market efforts to reshore production closer to home. That includes oil from the Gulf states India’s industrial sector Indonesia’s metals and Chile’s lithium. We see supply chain rewiring benefiting selected emerging markets that offer valuable commodities and supply chain input. We see supply chains rewiring as nations aim to bring production closer to home. We see competing blocs emerging, with multi-aligned countries based on national interests. We think emerging markets are relatively better positioned to withstand some of this volatility than developed market peers, even if they’re not immune from a sharp hit to risks assets. Title slide: Opportunities in rewiring globalization Last week’s jump in bond yields and stock tumble reaffirm that we’re in a new regime of greater volatility. Opening frame: What’s driving markets? Market take Chief Investment Strategist for Latin America, BlackRock Investment Institute
0 Comments
Leave a Reply.AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |