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27 Aug 2014
Fed brings EM enthusiasm to a halt - BAML
FXStreet (Guatemala) - Analysts at Bank of America Merrill Lynch explained that the EM asset performance has been lackluster in August despite rallies in both the S&P and US Treasuries.
Key Quotes
"The hawkish interpretation of Fed minutes may have brought some initial EM enthusiasm this month to a halt."
"Jackson Hole did not bring much in the way of policy guidance, but easier ECB policy could be positive for EM. EM equities have rallied fairly strongly in line with the S&P, gaining 1.8% month to date. However, external and local debt fared worse, returning 0.1% and -0.2%, respectively, while EMFX spot depreciated 0.4% on average."
"Investors in our GEMs Fixed Income and FX Sentiment Survey have taken a less bullish view on equities despite the relative outperformance so far this month. Overall, real money and hedge fund investors remain quite defensive on EM”.
“Long-only managers continue to take less risk in their portfolio relative to benchmark while over 60% of hedge funds use less than half their VAR. The persistence of investors' cautious bias could suggest that market corrections will continue to be shallower than in summer 2013."
Key Quotes
"The hawkish interpretation of Fed minutes may have brought some initial EM enthusiasm this month to a halt."
"Jackson Hole did not bring much in the way of policy guidance, but easier ECB policy could be positive for EM. EM equities have rallied fairly strongly in line with the S&P, gaining 1.8% month to date. However, external and local debt fared worse, returning 0.1% and -0.2%, respectively, while EMFX spot depreciated 0.4% on average."
"Investors in our GEMs Fixed Income and FX Sentiment Survey have taken a less bullish view on equities despite the relative outperformance so far this month. Overall, real money and hedge fund investors remain quite defensive on EM”.
“Long-only managers continue to take less risk in their portfolio relative to benchmark while over 60% of hedge funds use less than half their VAR. The persistence of investors' cautious bias could suggest that market corrections will continue to be shallower than in summer 2013."