Global Multi-Asset Viewpoint
Sep 2018
GMA Viewpoint: EM FX Crisis Playbook

Global Multi-Asset Viewpoint

GMA Viewpoint: EM FX Crisis Playbook

GMA Viewpoint: EM FX Crisis Playbook

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Sep 2018


Just as emerging market equities appeared to be exiting a five-year bear market, the U.S. dollar struck in the second quarter of 2018, punishing countries with clear imbalances and the asset class as a whole. Emerging market currencies fell -14% while equities have fallen by over -20% from peak to trough this year.1 In this letter, we consider whether this recent episode of emerging market underperformance could present investment opportunities in the asset class. Analyzing 12 emerging market currency crises in the past 30 years, we present data suggesting that the Argentine and Turkish currencies may present attractive investment opportunities, and that these countries’ U.S. dollar sovereign bonds may become attractive investment opportunities in the next month, but that it is too early to consider investing in their equities.

Head of Global Multi-Asset Team
Managing Director

1 MSIM GMA Team Analysis; Bloomberg; EM FX = JP Morgan EM Currency Index; EM Equities = MSCI EM Index in USD; as of October 5, 2018.

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

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