Looking forward to the Fed cutting interest rates, emerging market assets performed well in November

環球市場播報 ·  12/01/2023 06:16

Emerging market assets recorded one of the best monthly performances since this year in November, thanks to traders betting that the Fed will cut interest rates in the first half of next year, so they have readjusted their investment portfolios.

The MSCI Emerging Markets Stock Index closed up 7.6% in November, recording the biggest monthly increase since January. Furthermore, the index is also expected to record its biggest annual increase since 2020. Listed stocks of Latin American companies rose on Thursday and are poised to record their best annual performance since 2017. The MSCI Emerging Markets Currency Index rose about 2.6% in November to close at its highest level since March 2022.

Over the past month, traders boosted emerging market stocks, bonds, and currencies, as investors' expectations of falling US Treasury yields and a weaker dollar boosted the outlook for assets outside the US.

This trend has reinvigorated investor interest in emerging market bonds this month. According to J.P. Morgan data, the yield difference between emerging market sovereign bonds and US Treasury bonds narrowed by 24 basis points. For Latin American international bonds, interest spreads fell by 20 basis points in November, the biggest decline since July.

As far as stocks are concerned, some valuation indicators suggest that emerging markets will continue to rise.

Hasnain Malik of Tellimer Research wrote in a report earlier this week that in terms of market capitalization as a percentage of GDP, emerging market stocks are cheaper than developed markets, while frontier markets are cheaper.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
    Write a comment