Underpinning the recovery is a
resurgence in foreign-investor interest.
Emerging-market
investors seem to have everything going for them right now, with the November
rally offering a hint of what 2021 may have in store.
A plethora of
tailwinds from accommodative central banks to an impending change of U.S.
president and Covid-19
vaccine progress has put the assets of developing nations on course for
some impressive milestones. Bonds have wiped out their year-to-date losses,
while MSCI Inc.’s currency index is poised for the best month since January
2019 as well as a second successive annual gain. The MSCI stocks gauge is on
track for its best month since March 2016.
Underpinning the
recovery is a resurgence in foreign-investor interest. Fourth-quarter portfolio
inflows to emerging markets are poised to hit the highest in eight years, data
from the Institute of International Finance show. Yet, for all the euphoria,
foreign positioning in bonds and equities for developing nations excluding
China remains light, and Deutsche Bank AG’s Sameer Goel, says the rally is far
from over.
“It’s Goldilocks
for emerging markets’ under-invested assets as we go into 2021,” said Goel, the
bank’s head of emerging markets macro research in Singapore. They “have
considerable cyclical catch-up potential.”
Deutsche Bank
isn’t alone in seeing further gains. Goldman Sachs Group Inc. and JPMorgan
Chase & Co. have made bullish calls on the asset class in recent weeks. UBS
Group AG said last week emerging-market assets may benefit from the prospect of
“near-complete normalization” in global economic mobility by the end of next
year.
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