EM new equilibrium not too far away – TDS
By FXStreet FXStreet (Córdoba) – According to Cristian Maggio, Head of Emerging Markets Strategy at TD Securities, most Emerging markets have rebalanced throughout 2015 with a sharp drop in equity valuations and their currencies, “if you remove the tail risks, we may find out that the new equilibrium is not too far away. In fact, I believe several markets are already trading cheap to their fair value.”
Key Quotes:
“Risk premium must be higher to attract or retain flows, and until it gets to the proper equilibrium, the allure of EMs remains clinically dead. But most EMs have rebalanced throughout 2015 with upside rate corrections, a sharp drop in equity valuations and similarly large depreciation of their currencies. If you remove the tail risks, we may find out that the new equilibrium is not too far away. In fact, I believe several markets are already trading cheap to their fair value.”
“I’m not advocating that EMs are wonderland, because they are not. I’m not even saying that the asset class rewards an investor properly for the risks taken – some assets do, others don’t. But until we rid of the psychological cage that makes markets trade one way only, we cannot seriously talk …read more
Source:: FX Street
