Forward Thinkers

Investors understimate EM pressure

Institutional investors are twice as optimistic about America as they are about China, according to a recent survey undertaken by NN Investment Partners.

Only 22 percent of respondents view China as the most attractive geographical region in terms of risk versus return at present, compared with 46 percent who view America as attractive. Twice as many (40 percent) expect a slowdown in China’s economy in the next 12 months versus those who expect it to accelerate (18 percent).

Maarten-Jan Bakkum, senior emerging markets strategist, multi asset, NN Investment Partners, said: “When it comes to emerging market currencies, investors are split over their future of with the same proportion of investors - 37 percent - predicting that they will appreciate in the coming year as expecting them to depreciate.

“This survey result confirms once again that investors are still underestimating the large pressure on emerging markets from the Chinese slowdown and the gradual unwinding of the USD carry trade. EM growth momentum continues to deteriorate, while policy makers remain unable to improve the investment climate and allow for an orderly deleveraging process after years of excessive credit growth. EM currency risk remains high, as real effective exchange rates are still not reflecting the weak EM fundamentals and deteriorating global liquidity environment.”

 

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Forward Thinkers

By Valentijn van Nieuwenhuijzen, Head of Multi-Asset at NN Investment Partners

Talk about a currency war, doubts about Chinese policymakers’ credibility and worries over the Chinese economic slowdown and its ripple effects have ignited risk aversion among investors. 

Forward Thinkers

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Forward Thinkers

Speaking on the current market volatility, Valentijn van Nieuwenhuijzen, Head of Multi-Asset at NN Investment Partners, says: "In the aftermath of the shocking devaluation of the Chinese currency, markets remained focussed on fragility in the broader emerging market complex.