高盛-2018年新兴市场展望（英文）-2017.12-34页-1mb

EM Strategy Views Summary

Core Content

This document outlines a bullish outlook for Emerging Markets (EM) assets in 2018, emphasizing the potential for continued growth and positive returns across equity, credit, FX, and local rates. It addresses common investor concerns regarding growth sustainability, asset class dispersion, and the impact of US monetary policy on EM returns.

Main Points

1. Growth Outlook and Market Performance

• Above-trend growth is expected in 2018, with EM GDP projected to accelerate by 40bp (GDP-weighted) and 20bp (equal-weighted).
• Consensus forecasts for 2018 growth are muted compared to previous years, but the bar for upside surprises is low.
• EM assets have historically withstood negative GDP revisions (up to -25bp) without posting negative returns.
• Beta to GDP growth is lower when EM growth is above trend, but markets still react strongly to growth surprises when near trend.

2. Synchronous Growth Cycle

• The EM growth cycle is synchronous with DM, indicating a broad-based expansion.
• This synchronicity has insulated EM assets from US rate hikes compared to the 2013-2015 period.
• Despite low return correlation across EM asset classes, the direction of returns is generally aligned due to the low volatility environment.
• The low dispersion in growth rates is expected to continue, but return differentiation is anticipated in 2018, especially in FX and local rates.

3. Is 2018 "More of the Same"?

• Yes, in aggregate, but at a slower pace compared to 2017.
• Equity returns will be driven by EPS growth (expected ~12%) rather than P/E expansion.
• Credit returns are expected to be lower than in 2017 due to limited spread compression and rising US rates.
• EM FX is expected to appreciate by ~2%, similar to the 2005-2007 bull market.
• Local rates are likely to rise, but carry and FX appreciation will help cushion returns.

4. Best Growth Stories in EM Equity

• Asian equities (China, Korea, India, Taiwan) have outperformed the EM average.
• Profit margin expansion is the key to further equity returns, particularly in Brazil, Mexico, Indonesia, and Russia.
• While Asian equities have limited room for margin expansion, domestic exposure in Brazil and Russia is seen as a better opportunity for 2018.

5. High Yield vs. Low Yield in EM Credit

• High-spread credits have historically outperformed low-spread credits.
• The strategy is expected to continue in 2018, with low risk of persistent spread widening.
• FX outperformance over credit is noted in Turkey, South Africa, and Mexico, suggesting a shift in preference from credit to FX in these markets.

6. EM Local Rates and US Rate Risks

• EM local rates have low beta to US rates in Brazil, Russia, India, Colombia, Peru, and China.
• Inflation support is a key driver, though it is expected to be less so in India and Brazil.
• Despite US rate hikes, yield levels in EM local bonds (~6.2%) and FX appreciation should help maintain positive returns.

7. Best EM FX Upside

• "Value" FX (MXN, ZAR, TRY) has started to recover and may be worth rotating into.
• Commodity-sensitive FX (CLP, PEN, BRL) and Asia Growth FX (KRW, IDR, INR) are preferred for their macro exposure and carry.
• "Value" FX is currently the least expensive and offers a high nominal carry (~8%).
• Metals FX (CLP, PEN) and Global Trade FX (KRW, IDR) are also seen as undervalued and growth-sensitive.

Key Insights

• EM growth is expected to be sustained and above trend in 2018, supporting continued asset performance.
• Return dispersion is likely to increase in 2018, particularly in FX and local rates.
• EM FX and local rates are expected to perform well, even in the face of US rate hikes.
• Equity returns will be driven by EPS growth, with profit margin expansion being a key differentiator.
• Credit returns are expected to be lower than in 2017 due to limited spread compression.
• High-spread credits are still a preferred strategy in EM credit, with low risk of spread widening.
• FX vs. credit is recommended as a relative value trade in certain EMs.
• "Value" FX is a potential entry point for investors, especially in a low volatility environment.

Asset Class Focus

Conclusion

The 2018 EM outlook remains constructive, with broad-based growth and positive returns expected across asset classes. While the pace of growth may slow, the low volatility environment and relative value opportunities in FX and local rates should support EM assets. Investors are advised to focus on EPS growth in equities, high-spread credits, and growth-sensitive FX for the best returns.