Market Overview

Deutsche Bank Is Out Calling For Improvement In Emerging Markets


In a new report, Deutsche Bank analyst Harold Thompson discusses growing concerns about the health of emerging market economies and currencies. According to Thomson the worst of the devaluations and growth declines may now be over.

Emerging market currencies have lost about a third of their value since the beginning of 2013. “Said differently, over the last three years, the value in dollar terms of what 6.3bn people produce has fallen by a third,” Thompson adds. “However, the financial pain of this devaluation period appears to be behind us.”

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Thompson expects that, much like previous temporary slowdowns in emerging markets, growth conditions will likely soon begin to improve.

“Investors expecting the current bloodbath in emerging markets to persist and that pain to be shared by western consumer staples companies will be surprised by this upbeat message,” he acknowledges.

Global consumer staples companies are not as heavily reliant on the emerging market economies of China, Brazil and Russia as other companies. Only about a third of global emerging market consumer staples sales are generated in these three countries, which is much lower than the exposure of other industries like luxury goods.

So far this year, the iShares FTSE/Xinhua China 25 Index (ETF) (NYSE: FXI) is down 15.3 percent, while the iShares MSCI Emerging Markets Indx (ETF) (NYSE: EEM) is down just 7.4 percent.

Disclosure: the author holds no position in the stocks mentioned.

Posted-In: Analyst Color Long Ideas Emerging Markets Forex Economics Markets Analyst Ratings Trading Ideas


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