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Emerging-Market Yield Hunt Will Trump Trade Wars for Now: Survey

Yumi Teso, Marcus Wong and Selcuk Gokoluk
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Emerging-Market Yield Hunt Will Trump Trade Wars for Now: Survey

(Bloomberg) -- The hunt for yield is still on in emerging markets. And as that plays out, expect Asia to outperform.

Those are the main findings of Bloomberg’s quarterly survey of 54 global investors, strategists and traders on their outlook for developing-nation assets.

The trade dispute between the U.S. and China remains a key concern, with new round of negotiation due this week. But looser monetary policy among major central banks will still push investors toward riskier assets over the rest of the year, according to the survey. Stocks and bonds in Asia have the brightest prospects, while the Brazilian real and Russian ruble were the top picks for currencies. Argentina was the least-favored nation for all asset classes.

“The direction of global growth is pointing downward and that’s a negative for risk assets,” said Satoru Matsumoto, a Tokyo-based fund manager at Asset Management One Co., which oversees about $500 billion. “But we all have to find higher yields somewhere.”

Below are the results of the Sept. 19 - 30 survey. Click here to read the previous poll.

Survey Results

Emerging-market assets have just come through what was their worst quarter in 2019, as investors fretted over trade wars and the rising risk of a global recession. MSCI Inc.’s index of currencies is poised for a second yearly loss, while a measure of stocks is holding on to a 3.2% gain for the year. With central banks turning more dovish and inflation in emerging markets slowing, a Bloomberg Barclays index of local-currency bonds is still keeping a year-to-date gain of 4.7%.

After the U.S. Federal Reserve cut interest rates for a second time this year in mid-September, emerging-market watchers shifted their focus to the trade war. The imposition of tariffs has hit growth in emerging markets, prompting authorities into action to contain the fallout. The World Trade Organization reduced its global trade-growth forecast for 2019 to the weakest level in a decade, while the International Monetary Fund expects a more significant economic slowdown than it did three months ago.

Read more: China Narrows Scope for Trade Deal With U.S. Ahead of Talks

Asia kept its top positions for currencies and stocks and overtook Latin America for bonds. Europe, the Middle East and Africa remained the least favored region across all asset classes.

The Brazilian real’s become the EM currency most likely to outperform, while Asian high-yielder Indonesia remained the top pick for bonds. For equities, China kept the No. 1 ranking for the third straight quarter, while India overtook Brazil as the second-most favored stock market.

Finally, here is the outlook for inflation, monetary policy and economic growth across 12 emerging markets:

The survey participants:

Aberdeen Standard InvestmentsADM Investor ServicesAllianceBernstein Holding LPAperture Investors LLCARX InvestimentosAsset Management One Co.Auerbach Grayson & Co. LLCAviva Investors Global ServicesAxiTrader Ltd.Banco Bilbao Vizcaya Argentaria SABNP Paribas Asset ManagementBoston Private Wealth LLCBulltick LLCCapitulum Asset Management GmbHCIMB Group Holdings Bhd.Commerzbank AGCredit AgricoleDBS Group Holdings Ltd.Deltec Asset Management LLCDeutsche Bank AGDeutsche Bank Wealth ManagementEFG HermesEmerginomicsFidelity InternationalFujitomi Co.FXTMGAM InvestmentsGW&K Investment Management LLCInfinity Asset ManagementKasikornbank PclKrung Thai Bank PclLegal & General Investment ManagementManulife Asset ManagementMirae Asset Wealth ManagementMizuho Bank Ltd.Mizuho Research Institute Ltd.Monex Europe Ltd.NEPC LLCNeuberger Berman Group LLCNN Investment Partners BVNomura Asset Management Co.Nordea Bank ABOffice Fukaya, Research & ConsultingRaiffeisen Bank International AGSBI Securities Co.Schroders PlcSeaport Global Holdings LLCSociete Generale SASumitomo Mitsui DS Asset Management Co.TD SecuritiesTIAATrafalgar InvestimentosVanguard Asset ManagementWisdomTree Investments Inc.

(Updates prices in sixth paragraph.)

--With assistance from Tomoko Yamazaki, Aline Oyamada, Adrian Krajewski, Áine Quinn, Ben Bartenstein, Colleen Goko, Josue Leonel, Justin Villamil, Lilian Karunungan, Paul Wallace and Matt Turner.

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net;Marcus Wong in Singapore at mwong547@bloomberg.net;Selcuk Gokoluk in London at sgokoluk@bloomberg.net

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Paul Wallace

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