The firm’s GDP tracker based on monthly output and spending data showed the region grew 4.4 percent in March, unchanged from February, while it may have slowed to 4.1 percent in April. Most of the weakness was driven by China, with growth expected to ease in the coming months amid the country’s regulatory crackdown. Shearing views this as a cyclical slowdown rather than a hard landing.
Deutsche Bank Wealth Management
Emerging-market debt is also becoming less attractive thanks to the rally, with the region’s dollar-bond premium narrowing to its lowest since September 2014.
“We are still quite positive, but not to an extent about 12 months ago,” Tuan Huynh, chief investment officer for Asia Pacific at Deutsche Bank Wealth Management, said at a briefing this week. “Clearly, spreads have come down quite substantially, yields are also coming down, so your risk-return reward is not as variable.”
Institute of International Finance
Despite these views, foreign investors continued to pile into emerging markets in May.
Non-resident portfolio inflows came in at $20.5 billion last month, about the same as April and above $20 billion for a fourth straight month, according to IIF analysts.
“A weaker U.S. dollar and more dovish bets on future Fed rate hikes by market participants, as well as solid EM growth, have been key drivers of portfolio inflows,” IIF deputy director Emre Tiftik and senior research analyst Scott Farnham wrote in a May 31 note.
BNP Paribas
“Previously it was very clear you want to be bullish on Indonesia, India and Brazil,” said Mirza Baig, Singapore-based head of foreign-exchange and rate strategy for Asia at BNP Paribas, speaking of the countries’ currencies and domestic debt. “It’s time to start looking at some other markets.”