‘RALLY WILL RUN OUT OF STEAM’

DO NOT BE fooled into believing that the emerging-market rally fuelled by a “patient” US Federal Reserve will last throughout this year. Satoru Matsumoto, a fund manager at Japan’s Asset Management One, which oversees the equivalent of about $490 billion (R6.55 trillion), said the economic slowdown in China, followed by the US amid trade tensions, will weigh on assets. While developing-nation stocks just completed their best month since March 2016, and currencies scored the biggest monthly gain in a year, only those that meet three key criteria – solid growth, benign inflation and no significant political risks – are worth chasing, he said. And that leaves him with countries such as Indonesia and Brazil. “It’s going to be a year where you’ve got to be selective with your emerging-market bets,” Tokyobased Matsumoto said in a telephone interview. “A dovish Federal Reserve has given some leg to the recent emergingmarket rally, but I don’t expect this to lead to the kind of Goldilocks environment we saw back in 2017. Sure, the bears might have disappeared more, but I don’t think investors are going overweight aggressively,” he said. Emerging markets are recovering from a sullen 2018 that followed a dream run that took assets to multi-year highs. An MSCI index of developing-nation currencies gained 2.6 percent last year, while a measure of equities added 8.7 percent. The Bloomberg Barclays index of emergingmarket local currency bonds increased for a third month, rising 2.6 percent. The currency index fell 0.2 percent, while the equity measure declined 0.3 percent in Singapore yesterday. | Bloomberg