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Inflows to China support bonds

Weekly investor research

21 May 2018

Continuing inflows into China’s domestic markets have supported CNY and helped to make Chinese bonds among the strongest performers over the past year. The rate of economic growth accelerated strongly in Chile and Thailand. In Venezuela, Nicholas Maduro secured another term in office, but there are serious questions about how long he can hold on to power given the dire economic situation and the threat of sanctions. IMF issued strong support for Argentina after the government announced fiscal measures. A NAFTA deadline came and went in Mexico. Brazil’s central bank interrupted the cutting cycle. In Russia, President Putin’s new cabinet suggests continued emphasis on orthodox economies policies. Malaysia cut GST from a position of fiscal strength. Turkey’s Erdogan did his best to undermine confidence in the Lira. Sentiment towards Emerging Markets (EM) continued to deteriorate despite the lack of fundamental or valuation drivers; this suggests that a very powerful value proposition is currently in the making within EM local markets in particular, which bodes well for returns over the next couple of years.

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