Brazil, Russia Get Top Marks in Emerging Market Survey

  • Nations with high carry, likely rate cuts seen outperforming
  • Investors most bearish on China, Turkey due to tightening

Nomura's Subbaraman: Why We're Cautious on EM

Combine the prospects for interest-rate cuts with their higher carry-trade returns and two countries stand out as the best bets this year in emerging markets: Brazil and Russia.

In a survey of 16 investors and analysts conducted Jan. 23 to Feb. 1, the nations’ bonds and currencies got the strongest backing among 10 developing economies. China was the least favored.

“Countries that represent improving fundamentals and offer high carry are likely to outperform, especially if they are still in the process of cutting interest rates,” said Jens Nystedt, a New York-based money manager at Morgan Stanley Investment Management overseeing $417 billion in assets. “Asia, given its lower yields and reflecting increased trade tension, remains vulnerable to higher global interest rates, with China explicitly trying to tighten monetary conditions.”

NOTE: Respondents in the survey are from Standard Life Investments Ltd., Pioneer Investment Management Ltd., SBI Securities Co., Mitsubishi UFJ Kokusai Asset Management Co., UBS Asset Management, Morgan Stanley Investment Management, Schroder Investment Management Ltd., Standard Chartered Plc, Amundi Asset Management, BNP Paribas Investment Partners, Daiwa SB Investments Ltd., Mizuho Bank Ltd., AllianceBernstein LP,
Invesco Advisers Inc., and Stone Harbor Investment Partners.

— With assistance by Ben Bartenstein, Aline Oyamada, and Hannah Dormido

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