Pimco, GMO Refine EM Playbook as Fed Set to Shake Up Market

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Emerging Markets,Bloomberg,Pramol Dhawan

(Bloomberg) -- Top-performing emerging-market bond managers are recalibrating positions as the most anticipated US interest rate cut in decades brings fresh ...

-- Top-performing emerging-market bond managers are recalibrating positions as the most anticipated US interest rate cut in decades brings fresh impetus to an asset class buffeted by nearly $15 billion in outflows this year.Turkey Plans Istanbul Taxi Surge to Tackle Complaints

Emerging markets have been mired by volatility as global economic uncertainty and regional conflicts roil buoyant forecasts. A gauge of EM equities has gained about 11% in the past 12 months, lagging a 26% rally for the S&P 500 Index. Most recently, investors have been left scrambling following aplunge in Mexico’s peso and wild swings in Brazil’s real amid a mix of local woes and the unwinding of global carry trade positions.

Local markets have been “quite a strong performing trade strategy even against the backdrop of an appreciating dollar,” said Dhawan, who favors local bonds and currencies in Turkey and South Africa, as well as receiving long-term rates in Latin America. “If you’re well diversified within EMFX, it’s been quite a profitable trade.”

“As long as things are going in the right direction in terms of reforms by the government,” he said. “There’s still a lot of scope for returns and for spreads to compress.” “EM is just one of those places which I think is rich with opportunities, but you don’t want to be last to the game,” Dhawan said. “You have to move a little bit ahead of the Fed on this and start reallocating your portfolios.”In Brazil, the market is watching for a second-quarter GDP print that should confirm robust expansion of the economy.

Germans in the two states of Thuringia and Saxony voted in regional elections on the weekend, with exit polls showing Monday that a far-right political party has secured its first election victory since World War II.Tunisian police arrested presidential candidate Ayachi Zammel on Monday, a member of his campaign told Reuters, amid growing fears among rights groups and the opposition that prominent rivals to President Kais Saied will be excluded‮ ‬from the race.

 

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