高盛-新兴市场-投资策略-信贷疲软不是宏观“金丝雀”-20180406-27页_1mb

EM Strategy Views Summary

Core Content

The document discusses the current state of Emerging Market (EM) credit and its performance relative to other EM asset classes and global markets. It argues that while EM credit has underperformed in recent months, this is not a sign of a broader macroeconomic downturn, but rather a reflection of technical factors and stretched valuations. The overall EM market is viewed as resilient, with growth fundamentals still intact and the potential for further upside.

Main Points

1. Credit Weakness is Not a Macro "Canary"

• Headline Risks: Global markets have been under pressure from macro headwinds such as trade wars, Fed leadership changes, and softening global growth.
• EM Credit as the Weakest Link: Despite a resilient EM backdrop, credit has underperformed, which has raised concerns among macro investors.
• Equity and FX Recovery: EM equity and FX have bounced back more quickly than expected, suggesting that the credit weakness is not necessarily a sign of macro trouble.
• Valuation and Technical Factors: EM credit's underperformance is likely due to relatively stretched valuations and technical factors, not fundamental deterioration.

2. Credit Spreads and Equity Valuations Move In Sync

• Historical Correlation: Credit spreads and equity valuations tend to move closely, and EM credit is currently in line with historical trends.
• Valuation Signal: While EM credit is slightly expensive relative to equity, it is not "out of whack" and does not signal a macro turnaround.
• Market Behavior: The recent sell-off in EM credit is more reflective of technical factors than a fundamental shift.

3. EM Credit is Not Out of Sync with Other Global Assets

• US Rates as an Outlier: The only asset that seems out of sync is the US 6-month Treasury, which has moved atypically during the recent sell-off.
• Global Asset Behavior: EM credit has moved in line with other global assets, suggesting that the underperformance is not isolated.

4. Fundamentals Remain Strong, but Leverage is a Concern

• Improving Growth and Inflation: EM macro fundamentals, including growth and inflation, continue to improve.
• Interest Coverage: Interest coverage ratios remain healthy, though corporate leverage has increased since 2011.
• High Leverage Countries: Countries like Turkey and some commodity-heavy EMs (e.g., Brazil, South Africa) face higher risks due to rising leverage and sensitivity to external shocks.

5. Latin America Outperforms Asia Tactically

• Preferred Region: Latin America is highlighted as the preferred tactical region across EM assets.
• Equity and Fixed Income: Latin America offers more room for profit margin expansion in equity and higher carry in fixed income compared to Asia.
• Commodity Exposure: Latin America's performance is closely tied to commodity prices, which are expected to rise in 2018, further supporting its outperformance.
• Political Headlines: Positive political developments in Brazil, Mexico, and Chile support the Latin America outperformance narrative.

Key Information

• Credit Weakness: EM credit has underperformed in 2018, but this is not a sign of macro weakness.
• Valuation Context: EM credit spreads are slightly wider than historical averages, but not excessively so.
• Fundamentals: EM growth and inflation are improving, with interest coverage ratios remaining healthy.
• Tactical Preference: Latin America is preferred over Asia in EM credit due to its relative outperformance and favorable macro conditions.
• Market Outlook: EM assets are expected to rise in 2018, with a focus on relative value opportunities, particularly in Latin America.

Conclusion

The document concludes that EM credit weakness is not a macro "canary" but rather a result of technical factors and valuation dynamics. While macro risks remain, EM fundamentals are still strong, and the credit market's behavior aligns with historical patterns. Latin America is seen as a key outperformer in the current environment, offering a compelling tactical opportunity. Investors are advised to maintain a strategic bullish stance on EM assets and look for relative value opportunities, especially in Latin America over Asia.