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13 Apr 2015
Strong equity and weak FX trend in EM to continue near-term – BBH
FXStreet (Barcelona) - With broader USD rally back in the picture, EM assets are exhibiting the same pattern of stronger equity markets and weaker currencies, note the Brown Brothers Harriman Team, and further comment on the key drivers in the Chinese, Russian and Brazilian markets.
Key Quotes
“EM assets are starting the week on a now familiar pattern: weaker currencies but stronger stock markets. The broad dollar rally is back in force, with the greenback pushing back against earlier cycle highs against many of the major currencies. This is taking a toll on EM currencies as well.”
“Overall, we think this strong equity/weak currency trend is likely to continue for the near-term, albeit with some differentiation within EM.”
“In China for example, a sizable correction is bound to happen sooner or later after the parabolic rise in stocks in recent months. Although we still see the drivers for the rally remaining in place, the risk-reward doesn’t look so favorable in the short term.”
“In Russia, we view the strong rally of the ruble as driven mostly by short-covering, and doubt foreign investors are committing any new funds.”
“In Brazil, meanwhile, anti-government protests over the weekend were considerably smaller than the last one, but the still enough to keep the pressure on.”
Key Quotes
“EM assets are starting the week on a now familiar pattern: weaker currencies but stronger stock markets. The broad dollar rally is back in force, with the greenback pushing back against earlier cycle highs against many of the major currencies. This is taking a toll on EM currencies as well.”
“Overall, we think this strong equity/weak currency trend is likely to continue for the near-term, albeit with some differentiation within EM.”
“In China for example, a sizable correction is bound to happen sooner or later after the parabolic rise in stocks in recent months. Although we still see the drivers for the rally remaining in place, the risk-reward doesn’t look so favorable in the short term.”
“In Russia, we view the strong rally of the ruble as driven mostly by short-covering, and doubt foreign investors are committing any new funds.”
“In Brazil, meanwhile, anti-government protests over the weekend were considerably smaller than the last one, but the still enough to keep the pressure on.”