高盛_强势美元与新兴市场热点-20180525-27页_1mb

EM Strategy Views Summary

Core Content and Key Insights

• EM Underperformance: Emerging Market (EM) assets have underperformed Developed Market (DM) counterparts, with Argentina and Turkey being the most affected "hot-spots".
• External Factors: The underperformance is primarily attributed to an unfavourable external environment, including a rising US Dollar (DXY) and higher US 10-year rates, rather than intrinsic vulnerabilities across the EM landscape.
• Beta vs Alpha: EM underperformance is seen as a "beta" move, driven by macro factors. However, EM generated significant "alpha" in late 2017 and early 2018, which has since normalized.

Main Points

1. EM Credit Underperformance

• EM credit has underperformed significantly, especially frontier credits, due to the sharp rise in US rates and outflows from EM hard-currency bond funds (around $5.6 billion since January 31).
• The underperformance of EM credit is more attributable to the risk premium shift rather than fundamental issues, as shown by the correlation between starting spread levels and subsequent performance.

2. Current Account Balances

• EM countries with weak current account balances (e.g., Argentina and Turkey) have been more affected by the recent sell-off.
• Strong current account balances do not consistently lead to outperformance, especially during periods of rising US rates.
• However, during periods of strong EM growth, weak current account countries often outperform.
• EMs with moderate deficits (e.g., South Africa and Colombia) have been relatively insulated due to better political developments and commodity exports.

3. Macroeconomic Outlook

• The authors expect a more favorable external environment in the second half of the year, which should lead to a recovery in EM assets.
• EM credit spreads are expected to tighten in this environment, but macro vulnerabilities in smaller EM economies remain a concern.
• The USD is expected to return to a "soggy" path, and US rate volatility is likely to decline, improving EM prospects.

Key Information

• EM Credit Trends: The recent sell-off in EM credit is largely a risk premium story, with higher-spread credits experiencing more significant declines.
• US Rate Impact: The rise in US rates has had a disproportionate impact on EMs with weak fiscal balances and current account deficits.
• Historical Context: EM credit spreads have historically tightened when current account balances improve, but this trend has reversed since 2016.
• Catalysts for EM: A more favorable external environment, including lower USD appreciation and reduced US rate volatility, is expected to improve EM performance.
• Favorable EMs: ZAR and COP are seen as favorable EMs due to their ability to manage rate rises more gradually.

Exhibits Summary

• Exhibit 1: EM credit has diverged most from its macro factor-implied beta.
• Exhibit 2: Credit spreads of large EMs have moved in line with macro-implied beta and are expected to tighten in 2H.
• Exhibit 3: EM countries with weak current account balances (Argentina and Turkey) have been most affected by the recent sell-off.
• Exhibit 4: During periods of sharply rising US rates, FX markets tend to favor EMs with current account surpluses.
• Exhibit 5: EMs with improving current account balances have historically outperformed in credit and rates, but this trend has broken down since 2016.
• Exhibit 6: EM High Yield has underperformed compared to DM High Yield in recent months.
• Exhibit 7: Fiscally-weak EMs tend to outperform when US rates rise on stronger growth, but this pattern has not continued in the recent move.
• Exhibit 8: EM credit underperformance is correlated with higher starting spreads.

Appendix Summary

• Macro Forecasts: Goldman Sachs provides macro forecasts for EMs and the world, including GDP growth, inflation, and policy rates for 2017, 2018, and 2019.
• Activity Indicators: EM activity indicators show varying levels of performance across different economies.
• Valuation and Earnings: EM valuation metrics such as P/E and P/B are provided, along with earnings growth estimates.
• FX Performance: FX performance and forecasts are detailed, with a focus on return vs USD, 1-year forward rates, and real rates.
• Fund Flows and Positioning: EM mutual fund flows and cross-asset positioning are discussed, highlighting trends in portfolio investment and exchange-reported foreign flows.

Conclusion

• The EM sell-off is primarily driven by macro factors, particularly the rising USD and US rates, rather than internal vulnerabilities.
• The authors remain bullish on EM assets for the year, especially domestic EM stories in equity and fixed income.
• EM credit is expected to recover as the external environment improves, but caution is advised for EMs with large vulnerabilities.
• EM countries with strong fundamentals and manageable rate increases, such as South Africa and Colombia, are viewed more favorably.