There are other signs of investors returning to emerging markets. A three-times leveraged China stock ETF saw a record volume surge Tuesday and Wednesday, almost six times the daily average. The Indonesian rupiah has advanced around 0.6% this week, touching a one-month high, while the South Korean won and offshore yuan have both gained 1.3%.
Of course, it isn’t a perfect science. Typically emerging-market growth data “bottoms” around a peak in the dollar, and equity valuations often trade at greater discounts to the S&P 500, according to Goldman. Dollar peaks also tend to occur around recessions, the strategists wrote. “Given the nature and sequencing of the Covid crisis and reopening aftershocks, the past few months can be characterized as falling EM growth forecasts with outperforming growth differentials,” Maasry and Zhong wrote. It’s “an unusual occurrence.”“It works as a safe haven when US demand is slowing, the US economy is going into recession or growth is coming down,” Zach Pandl, strategist, said in an interview with Bloomberg Television.
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