The Essential Emerging Market (by Udith Sikand, GaveKal Capital) - These are challenging times for emerging markets and investors could be forgiven for writing...
The Essential Emerging Market (by Udith Sikand, GaveKal Capital) - These are challenging times for emerging markets and investors could be forgiven for writing them off as being more trouble than they are worth in terms of risk-adjusted returns. The macro environment is harsh given the continued cratering of commodity prices and a potential reversal of US dollar flows on the back of a likely Federal Reserve tightening. Still, we think this would be a terribly short sighted formulation as the coming year is likely to see a clear separation in EM performance based mainly on balance sheet strength and their room to ease policy. This wheat-from-the-chaff separation exercise has already started to play out and as a result, we are comfortable putting our necks on the line with a high conviction call on one particular market. Starting with the chaff, Indonesia, a commodity exporter, left interest rates unchanged last week in an effort to check domestic demand given upside risks to inflation and the threat of a widening current account deficit...cont'd: (VIEW LINK)
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