Worst days may be behind for EMs amid rate-cut pause

With little more than six weeks to the end of 2019, the signs are that the worst days of the year for emerging markets are in the past. But don’t bet on any major rally either.

Expected volatility is close to its lowest levels since 2014, stocks are failing to take their cue from bullish signals and a trio of central banks are poised to back away from stimulus-inducing rate cuts this week. That leaves markets largely hostage to the ups and downs of the trade talks, with the latest phone call between US and Chinese officials on Saturday likely to trigger at least a bout of optimism at the start of the week.

“Emerging markets are a mixed bag for the moment,” said Anders Faergemann, a London-based senior money manager at Pinebridge Investments, which oversees about $97 billion worldwide. “We are taking a selective approach, treating each country as an individual credit and spending more time reviewing the economic fundamentals.”


Protests in Latin America, Lebanon and Hong Kong will also probably cause “some consternation” for emerging markets in the short term, according to Faergemann, who says he favours Ukraine and Egypt for their reforms, while staying on the lookout for “improving stories” in Ghana, Angola and Ivory Coast.

JPMorgan Chase & Co's implied volatility index for developing-nation currencies was at 7.2 per cent, near the five-year low of 6.9 per cent reached in July.