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Fed unwinds QE: what is in store for EM?

Weekly investor research

25 September 2017

What happens to Emerging Markets (EM) as Quantitative Easing (QE) gets unwound? We expect the big four ‘QE trades’ of the past few years to go into reverse gear. This should be bullish for EM assets, especially local currency and equities. In EM country specific news, we highlight fiscal policy in India, Russia’s intervention to support B&N bank and South Africa’s reserve bank’s decision not to cut rates despite expectations to the contrary. In other news, the date for Kenya’s election re-run has been set for 26 October, S&P undermines its own reputation by downgrading China’s sovereign credit rating, Mexico’s inflation prints finally fall below expectations, Ecuador’s President Moreno calls for a referendum on political reform and the good macroeconomic news continues in Brazil. The global backdrop section highlights the next focus in European politics after the German election, UK’s Brexit woes and the fact that the FOMC looks set for major changes in the coming months.

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