高盛：强势美元与新兴市场热点-20180525-27页_1mb

EM Strategy Views Summary

Core Content

This document provides an analysis of Emerging Market (EM) asset performance, emphasizing that the recent sell-off is primarily driven by external macroeconomic factors rather than internal EM vulnerabilities. The focus is on the impact of the "King Dollar" and rising US interest rates on EM assets, with a special emphasis on the performance of EM credit and the role of current account balances.

Main Views

1. EM Sell-off is a "Beta" Story

• Key Insight: The recent underperformance of EM assets is largely due to the unfavorable external environment, specifically the appreciation of the USD (DXY index) and rising US 10-year interest rates.
• Model Analysis: EM returns are modeled as a function of DM asset prices, DXY, US 10-year rates, and oil prices. The results show that the recent moves in EM are well-explained by these macro factors.
• Credit Exception: EM credit has underperformed more significantly than other asset classes, particularly frontier credits, but this is attributed to valuation issues rather than fundamental weakness.
• Future Outlook: The authors expect a more favorable external environment in the second half of 2018, which should lead to a reversal in EM underperformance, with EM assets likely to outperform.

2. Current Account Balance and EM Performance

• Current Account Deficits: Countries like Argentina and Turkey have large current account deficits, which have exacerbated their FX market underperformance.
• Surplus vs. Deficit: During periods of sharply rising US rates, FX markets tend to favor current account surplus economies. However, during strong EM growth periods (e.g., 2016-2017), deficit economies often outperform.
• Political Factors: Moderate deficit economies such as South Africa and Colombia have been relatively insulated due to favorable political developments.
• Fiscal Vulnerability: EMs with weak fiscal balances tend to underperform during rising US rates, but this pattern has not continued in the recent sell-off.

3. EM Credit in "Risk Off" Mode

• Credit Spread Divergence: EM credit spreads have widened significantly, while US high-yield credit has continued to outperform.
• Outflows Impact: Sharp outflows from EM hard-currency bond funds ($5.6 billion) have increased selling pressure on EM credit, especially on higher-yield credits.
• Future Outlook: The authors expect credit spreads to tighten in 2H 2018 as the external environment becomes more favorable, although they remain cautious on some vulnerable markets.

Key Information

• EM Performance: EM assets have broadly underperformed DM counterparts, but this is attributed to external factors rather than internal vulnerabilities.
• Credit Underperformance: EM credit, particularly frontier credits, has underperformed more than other asset classes, but this is not a reflection of fundamental weakness.
• Current Account Balance: EMs with weak current account balances have been more affected by the recent sell-off, while those with improving balances have shown better resilience.
• Macro Outlook: The authors expect a more favorable external environment in 2H 2018, with a weaker USD, stronger S&P 500, and lower US rate volatility, which should support EM asset performance.

Strategic Recommendations

• Bullish on EM: The authors remain bullish on EM assets from a strategic perspective, despite near-term caution on some vulnerable economies.
• Catalyst for EM: Global growth improvement is seen as the key catalyst for renewed EM outperformance.
• Credit Focus: Credit investors should be cautious on EMs with large current account deficits and weak fiscal balances, but may find opportunities in more stable markets like South Africa and Colombia.

Supporting Data

• Exhibit 1: EM FX, Equity, and Local Rates have underperformed their beta-implied levels since mid-April 2018, but this is seen as mean-reversion from strong performance in early 2018.
• Exhibit 2: Credit spreads of large EMs have moved in line with their macro factor-implied beta, suggesting a potential tightening in 2H.
• Exhibit 3: EM countries with weak current account balances have experienced the largest FX market declines.
• Exhibit 4: During periods of sharply rising US rates, current account deficit economies tend to underperform in FX markets.
• Exhibit 5: EMs with improving current account balances have historically outperformed in credit and rates, but this trend has broken since 2016.
• Exhibit 6: EM High Yield has underperformed compared to DM High Yield in the recent sell-off.
• Exhibit 7: EM credit spreads have widened more significantly in countries with weak fiscal balances, but this pattern has not continued in the recent move.
• Exhibit 8: EM credit spreads have sold off more for those with higher spreads, suggesting a risk premia story rather than fundamental weakness.

Macro Forecasts and Activity

• GDP Growth: EMs are expected to grow at a moderate pace in 2018, with some notable exceptions like Turkey.
• Inflation: EM inflation is expected to remain elevated in some countries, but there is a trend of moderation.
• Policy Rates: EM policy rates are expected to rise, with some countries like Turkey experiencing significant increases.
• FX Forecast: The USD is expected to weaken in 2H 2018, which should support EM currencies.
• Current Activity Indicators: EM current activity indicators show a mix of growth and stability, with some countries experiencing improved conditions.
• Valuation and Earnings Growth: EM valuation metrics show mixed performance, with some countries showing strong earnings growth and others more modest.

Conclusion

The document concludes that the recent EM sell-off is primarily a "beta" story driven by external macroeconomic factors, and not a reflection of intrinsic vulnerabilities. The authors remain bullish on EM assets for the year, with a strategic outlook that the external environment will improve, leading to EM outperformance. They caution against overexposure to vulnerable EMs but suggest opportunities in more stable markets.