Emerging-market watchers say another sell-off is approaching


Emerging markets are likely to see another sell-off later this year, puncturing their recovery from the coronavirus pandemic and adding to losses that have already totalled $3 trillion (R55 trillion at current exchange rates) a survey has found.

The next selling frenzy in stocks will most probably break out by September, according to the majority of 61 investors, strategists and traders surveyed last month.

Latin America is expected to be the worst-performing region for currencies, bonds and equities in the second half. While expecting another round of selling, most respondents still expect an eventual recovery, with a majority seeing assets ending the year higher than current levels.

Emerging-market investments have seen a significant bounce back from their initial coronavirus sell-off, with the MSCI Emerging Markets Index posting its biggest monthly gain in four years in April. Sentiment has been boosted by optimism about potential drugs being developed to fight the pathogen, global stimulus efforts and signs that global lockdowns are easing. While the outlook remains volatile, the majority of the respondents still see gains in all three asset classes by year-end.

In terms of geographic areas, Asian assets are seen as the most attractive for stocks, currencies and bonds, the survey found, with the region’s fixed-income securities regaining the top spot they lost in the previous survey. Latin America is expected to be the laggard in all three categories as it suffers the greatest fallout from the virus pandemic.

"Latin America is a big concern given how the region will enter winter and could see a further increase in infection cases," said Tetsuya Yamaguchi, chief technical analyst at Fujitomi in Tokyo. "The pandemic situation in Asian countries such as China and South Korea is starting to show some stabilisation, and the region has more room to deploy additional financial and fiscal stimulus."

The coronavirus outbreak that has decimated global markets this year replaced US-China trade tensions as the biggest expected driver for emerging markets in the second half of the year. The outlook for China’s economy was the only one of the top three key concerns that held its place from the December survey, while global fiscal stimulus efforts and their likely impact on developing economies ranked third.

When it comes to the comparison against the developed-market counterparts, survey respondents expect emerging currencies and stocks to underperform.The total value of emerging-market assets was more than $28 trillion at the end of last year, according to data compiled by Bloomberg based on the combined value of equities from 26 nations listed by MSCI Inc. along with Bloomberg Barclays bond indexes of local-currency bonds, dollar debt and euro-denominated securities.

At the end of April, more than $3 trillion had been wiped off that amount, led by a $2.8 trillion loss in stocks.

Respondents had a strong preference for lower-yielding assets from countries such as China, South Korea, Thailand and Poland. That’s a shift from the previous survey, where they had a clear preference for higher-yielding ones from nations such as Indonesia, Brazil and India.

Here is a list of the survey participants:

  • Aberdeen Standard Investments
  • Monex Europe
  • ADM Investor Services International
  • Monex
  • Algebris Investments
  • Neuberger Berman
  • AllianceBernstein Holding LP
  • Nissay Asset Management
  • Allianz Global Investors
  • Nomura Asset Management Co.
  • Amundi Asset Management
  • Office Fukaya, Research & Consulting
  • Asset Management One Co.
  • One River Asset Management
  • AxiCorp
  • Pictet Asset Management
  • Balchug Capital
  • Prime Partners
  • BNP Paribas Asset Management
  • Rabobank
  • BNY Mellon Investment Management
  • Robeco Institutional Asset Management Inc.
  • Capitulum Asset Management GmbH
  • SCB Securities Co.
  • Cartica Management, LLC
  • Schroders Plc
  • Citi Private Bank
  • Skandinaviska Enskilda Banken AB (SEB)Commerzbank AG
  • Societe Generale SA
  • Credit Suisse Group AG
  • Sova Capital Limited
  • Deutsche Bank
  • Sumitomo Mitsui DS Asset Management Co.
  • Deutsche Bank Wealth Management
  • TD Securities
  • Emerginomics
  • Thornburg Investment
  • Emso Asset Management
  • TS Lombard
  • Fidelity International
  • UBS Asset Management
  • Fujitomi Co.
  • Union Investment Privatfonds GmbH
  • Global X Management Co.
  • UOB Asset Management
  • ING Groep NV
  • UOB Private Bank
  • Kasikornbank Pcl
  • Vanguard Asset Management
  • Kleinwort Hambros
  • Voya Investment
  • Legal & General Investment Management
  • Wells Fargo Asset Management
  • Loomis, Sayles & Co.
  • Wells Fargo Securities
  • Manulife Investment Management
  • William Blair Investment Management
  • Mediolanum International Funds
  • WisdomTree Investments Inc.
  • Mirae Asset Global Investments LLC

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot