Current rally reflects expectations of better US growth given Trump's tax cuts and infrastructure spending rather than just risk aversion or inflation accelerating, says Sakthi Siva of Credit Suisse.
Sakthi Siva of Credit Suisse says the common investor perception is that the strong rally in MSCI Asia ex-Japan and its outperformance versus MSCI World prior to Donald Trump's election victory was largely driven by inflows into emerging markets led by a falling USD and plunging bond yields post the Brexit.
She further says while historically it has been difficult for Asia to rally/outperform with a rising US dollar and bond yields, she takes the more benign view that these rises reflect expectations of better US growth given Trump's tax cuts and infrastructure spending rather than just risk aversion or inflation accelerating.
Meanwhile, Drausio Giacomelli of Deutsche Bank says he is constructive emerging market in 2017 on improving prospects for global growth and better valuation, but both assets and economies will likely face a difficult start before the outlook brightens – especially for the more growth-sensitive assets.
A stormy end to 2016 and a challenging – yet hopeful – 2017 outlook characterize the emerging market complex, he feels.
Drausio says, "Typically, an improving G2 outlook will compel us to readily revise up our emerging market forecasts, but this time we are guarded, owing to the makings of a zero-sum de-globalized environment. He is moderately overweight on India.