The recent rebound in emerging-market stocks isn't over yet as investors move to assets that benefit from an improved outlook for the global economic recovery, according to Goldman Sachs Group Inc.[SAO PAULO] The recent rebound in emerging-market stocks isn't over yet as investors move to assets that benefit from an improved outlook for the global economic recovery, according to Goldman Sachs Group Inc.
"We're quite positive on EM stocks on a tactical basis," said Caesar Maasry, a New York-based emerging-market strategist at the firm."There has been an increasing preference for cyclical assets and we've also seen some US dollar weakness. This short-term trend is expected to continue." The MSCI Emerging Markets Index has gained 30 per cent since reaching a four-year low in late March, as some economies started to reopen and high-frequency data came in better than forecast. While risks include a potential second wave of coronavirus infections and valuations that appear a bit stretched, Goldman still sees room for gains on a three-month basis.
Following Latin America's underperformance earlier this year, Mr Maasry says the region offers a combination of cyclical exposure and value. With Brazilian stocks up 46 per cent from their lows, Goldman now sees better relative value in Mexico. Banking stocks in both countries look attractive, amid prospects for lower interest rates.
"Unlike developed markets, where net interest margins are paramount, credit growth is the more important driver in EM and tends to accelerate when interest rates are very low," he said.
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