新兴市场-投资策略-新兴市场策略观点：走过股价下跌.docx

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1、EMStrategyViewsMovingpasttheStockDrop:whatispricedandwhattotradeinEM31October2018

2、2:55PMEDTFortheexclusiveuseofTAN.XING@ICBCCS.COM.CNn“FlashCrash”anatomyispopular-butinvestorsarestillworriedabouttheconsequences.ThesuddendropinglobalequitiesinOctoberhasbeenlar

3、gelyexplainedasacombinationofgrowthworriesamidst“Fedtighteningcontinuity”.DuringinvestormeetingsintheUSandAsiaoverthepasttwoweekswefindthatmacroinvestorsremainworriedthattighteningfinancialconditionsandaslowingUSeconomyarelikelytokeeppressureonEMassetsgoingin

4、to2019;ourconvictioninEMbetahasdeclined,butwestillbelieveglobalgrowthismuchmoreimportanttotheoutlookthanatighteningFed(andthereforeChinamattersmoreforEM).Belowweaddressthemostcommonquestionsinrecentmeetings:n(1)Do“FlashCrashes”leadtogrowthslowdowns?Historyisf

5、ullofepisodeswheretheS&P500drops5%ormoreinaweek,andthesemostoftenoccurduringContractionperiodsofthebusinesscycle.Outsideofcontractions,thedistributionisfairlyeven-suggestingthereisnotaclearmacrosignalembeddedinquicksell-off.Thatsaid,USgrowthtendstoslowby~60bp

6、inthe6monthsfollowinga‘flashcrash’,andthisisconsistentwithourUSGDPforecasts.n(2)Whatareglobalmarketsdiscountingintermsofgrowth?Ourcross-assetgrowthfactorssuggestUSmarketsarediscountingroughly3%sequentialgrowthcurrently(whichisbelowourCAIfortheUS,butin-linewit

7、hour4Qestimate).EMisdiscountingaround3.5%(equalweightedacrossEMeconomies),whichisin-linewithcurrenttrackingestimates.ThissuggeststhatfurtherEMgrowthweaknesswilllikelyleadmarketslower-orthatthereisnotalotof‘cushion’builtintoEMpricingatcurrentlevels(thissignali

8、slessfavorablecomparedwiththesummer,despiteassetpricesbeinglowerbecausegrowthhasslowedmoresharplyacrossEMsincethen).n(3)CanEMassetsperformifChina(equities)continuetofacepressure?Giventheongoingconcernsabouttradetensionsandwhenthe“policyput”maybecomemorevisibl

9、einChina,macroinvestorsremainskepticalthatEMassetscanperformintheabsenceofamoremeaningfulrecoveryinChina,particularlyitslocalequitymarket.Lookingout6months,itisquiterareforEMex-Chinaequit