George Iwanicki, an emerging markets macro strategist, and Curtis Butler, a client portfolio manager who both work for the global emerging markets team at J.P. Morgan Asset Management have written a piece for Institutional Investor saying recent data suggests that emerging market decoupling may be nearing an end. They say the market has begun to take notice and the relative performance of emerging markets has improved noticeably in recent months.
The pair then suggested these three takeaways:
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The current decoupling is a cyclical phenomenon and the logical extension of orthodox policy measures adopted following the crisis.
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A decoupling of emerging-markets growth from developed-markets growth is both rare and, more important,unsustainable.
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There are early signs that a selective recoupling is under way, whereby manufacturing exporters are helping emerging markets rejoin the global recovery, supporting a return to emerging-markets equities.
They go on to write that we are seeing evidence to suggest that the economic and market decoupling that has plagued emerging markets since the peak in 2011 may be coming to an end as emerging market growth figures (though not yet showing consistent recovery) appear to have bottomed for this cycle, whereas developed markets may have seen their strongest gains. Evidence of this includes an upswing inthe local purchasing managers indexes in emerging markets relative to those in developed markets.
To read the whole article, Conscious Recoupling and Emerging Markets Equities, go to the website of Institutional Investor.
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