Summary

THE ESSENTIAL

The recent dovishness from the Fed, a benign inflation environment and the easing in global financial conditions continue to support a goldilocks environment for Emerging Markets (EM) assets. On the risks side, trade disputes appear to be softening as we approach the US presidential campaign. But the existing tariffs are weighing on the corporate earnings, with mixed prospects across regions as some countries are also benefitting from a restructuring of the global supply chain.

Against this backdrop EM bonds continue to be an attractive space for investors in search for yield. We still see better risk-reward in EM sovereigns, EM local rates (duration component) and corporate credit compared to EM FX, on which we are defensive, especially in low yielding, equity sensitive currencies in Asia (more exposed to trade and China growth).

On the equity side, Emerging Markets benefitted from the trade war truce announced at the G20 as well as more dovish EM Central Banks following the Fed and the ECB lead. Looking ahead we expect the outlook across regions to remain mixed. We look for areas of good fundamentals, interesting dividend yield and improving governance standards and for less vulnerable countries with stories of resilient domestic growth and progress in structural reforms.

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Authors

RC - Author - BERARDI Alessia
Head of Emerging Macro Strategy, Amundi Investment Institute
RC - Author - BOROWSKI Didier
Head of Macro Policy Research, Amundi Investment Institute
RC - Author - BERTINO Claudia
Head of Amundi Investment Insights & Publishing, Amundi Investment Institute
RC - Author - DELBO Debora
Senior EM Macro Strategist, Amundi Investment Institute
RC - Author - DHINGRA Ujjwal
Investment Insights & Client Divisions Specialist, Amundi Investment Institute
Co-Head of Emerging Markets Corporate and HY
RC - Author - FIOROT Laura
Head of Investment Insights & Client Divisions, Amundi Investment Institute
RC - Author - HERVE Karine
Senior EM Macro Strategist, Amundi Investment Institute
patrice-lemonnier
Head of EM Equity
Amundi Investment Insights Unit
sergei-strigo
Co-Head of Emerging Markets Fixed Income
syzdykov-yerlan
Global Head of Emerging Markets