By: Callum Thomas | AMP Capital
After a bit of a washout moment earlier this year, a distinct rise in optimism on emerging market (EM) equities has been seen. The renewed sense of optimism towards emerging market equities is something to keep an eye on if it gets too carried away, but for now a virtuous cycle is playing through.
The EM risk sentiment index (incorporating risk metrics across bonds, equities, and currencies) has calmed down after a sequence of ‘risk-off’ episodes. Notably, the EM PMI tends to do better when the EM risk sentiment index is above zero (lower risk perceptions). This is likely part of a self-reinforcing feedback loop, as better growth is consistent with lower risk pricing and lower risk pricing provides better conditions for growth. That being the case, we could be on the cusp of a virtuous cycle for emerging markets. Click here to read more.
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