“A full or immediate resolution to trade tensions seems unlikely,” Cuadrado said. “The fact that EM and particularly LatAm FX underperformed through 1Q19 when the market was in full risk on and pricing U.S./Chinese agreements, growth rebounds, a dovish Fed and so forth makes a prolonged EM/LatAm fX rebound unlikely.”
Paul Greer, a London-based money manager at Fidelity International, says he prefers rates over currencies because the latter is likely to be under pressure as trade tensions should remain elevated until the G-20 meeting in late June.
“Within EM, currencies remain the most sensitive part of our asset class to global growth, global trade and the U.S. dollar,” said Greer, whose emerging-market debt fund has outperformed 98% of peers this year after reducing risk in recent months. Within EM local markets he prefer local rates over FX, “especially duration in some of the lower beta Asian and Latam countries.”
Domestically driven stocks
In equities, JPMorgan Asset Management says it makes sense to bet on companies that depend more on the domestic market and are, therefore, protected to some extent from a trade slowdown. Even technology shares can be a good play if they are less dependent on external revenues, according to Richard Titherington, the firm’s chief investment officer for emerging markets and Asia Pacific equities.
This article provided by Bloomberg News.