![\"emerging_market_debt_equities_and_industrial_metals_performance_2016.jpg\"](\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/12\/emerging_market_debt_equities_and_industrial_metals_performance_2016.jpg\")
<\/p>\nEM equities and bonds took a hit immediately after the U.S. election, as
\ninvestors feared the new administration would be negative for global trade
\nand capital flows. As the chart shows, industrial metals and other commodities
\nquickly rebounded on hopes for increased infrastructure spending and amid
\nsigns of a pick-up in global growth.<\/p>\n
<\/p>\n
Scope to play catch up<\/strong><\/p>\n EM assets have stabilized somewhat but lagged a recent rally in commodities. Our conviction is that U.S.-led reflation \u2014 rising Risks abound in the short term, including a sharper rise in U.S. Treasury yields and the U.S. dollar as well as a quicker fall in China\u2019s We like selected commodity-producers but are wary of manufacturing countries vulnerable to a tougher U.S. stance on trade.
\nwages, nominal growth and inflation reinforced by an expected shift to fiscal stimulus \u2013 should be a big positive for many EM
\nassets. Greater infrastructure spending should boost demand for the commodities exported by EM producers.<\/p>\n
\nyuan. But we believe a gradual Federal Reserve, wary of tighter financial conditions, should limit dollar gains from here. Over the
\npast three years, EM assets have already weathered an economic downturn and dollar appreciation: Currencies are weaker and
\ncurrent account balances are generally in better shape. Commodity markets, a key source of earnings for many EM companies,
\nhave found a better demand\/supply balance \u2014 including crude oil after OPEC\u2019s decision last week to cut supply.<\/p>\n
\nWe prefer countries where structural reforms show a willingness to sacrifice short-term economic pain for long-term gain, such as
\nIndia\u2019s move to eliminate high-denomination banknotes. Finally, we prefer hard-currency EM bonds \u2014 particularly in high-yielding
\noil exporters such as Russia, Colombia and Kazakhstan \u2014 and short-duration local currency bonds in some countries.
<\/a>\n\t\t\t<\/div><\/figure>\n\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"