"Emerging Markets May Be Suddenly Hit On Multiple Fronts At Once", Trader Warns

Tyler Durden's picture

With emerging markets the best performing conventional asset class in 2017 by a wide margin (excluding cryptocurrencies of course), with a total return of nearly 50% YTD, performance not seen since 2009...

... Bloomberg macro strategist and commentator Mark Cudmore warns that we are now entering dangerous territory for Emerging-market whose "assets may be suddenly hit on multiple fronts at once" noting that "one of the core themes of 2017 has been the resilience of EM. And it’s precisely because of its solid and steady performance all year that pain can intensify so quickly. Complacent longs might soon be questioning what happened."

He explains why in his full Macro View note below.

Emerging Market Bearishness Can Come at You Fast:   

 

Emerging-market assets may be suddenly hit on multiple fronts at once. 

 

One of the core themes of 2017 has been the resilience of EM. And it’s precisely because of its solid and steady performance all year that pain can intensify so quickly. Complacent longs might soon be questioning what happened.

 

Between the Fed’s plan to reduce the balance sheet and the dollar’s nascent rebound, the environment is suddenly looking more difficult for EM. But similar macro concerns have been brushed off many times this year. The difference this time is that those macro pressures are being combined with a broad array of idiosyncratic negatives.

 

Asia will suffer due to a trifecta of rising oil prices, weakening tech stocks and a North Korean problem that appears to be intensifying by the week. That will be compounded by extended holidays in several of the region’s major markets -- China, South Korea and Taiwan. And a fear that the Xi Jinping "put" on economic growth in China may expire after the Communist Party Congress in mid-October.

 

Eastern Europe will be vulnerable to some retrenchment amid political tensions in both Germany and Spain. Greater integration, and hence convergence trades, will be on the back-burner for a few weeks.

 

As a major energy importer, Turkey is getting hit by the double-whammy of the geopolitical pressure from the Kurdish independence referendum and the related spike in oil prices.

 

South Africa, with by far the most liquid financial markets on the continent, is seeing a sharp terms-of-trade deterioration, due to lower metals prices but higher energy costs. That’s dangerous for a country with a large current-account deficit, minimal growth, high unemployment and a volatile currency.

 

Latin America will feel the pinch from weaker metals, but also suffer a deleveraging blow from yet another U.S. domestic policy failure.

From all sides, EM is likely to start feeling the pressure. And as long-time EM traders know well, sometimes the liquidity you saw on the way in just isn’t there on the way out.

 

 

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buzzsaw99's picture

Always with the negative waves Moriarty, always with the negative waves. [/Oddball, Kelly's Heroes ]

cossack55's picture

IMHO, one of the best war fliks ever.  "Maybe he's a republican"   Classic

jamesmmu's picture
Edward Karr: When Everything Else is Poised to Fail, Have a Gold Foundation

http://investmentwatchblog.com/edward-karr-when-everything-else-is-poise...

Last of the Middle Class's picture

Funny how the "negative waves" always wash up when the QE print forever and inflation is a concern bullshit fails to take hold. Propaganda is as propaganda does. There are no markets, anymore, just banker and MSM bullshit.

menchivist's picture

I take it you have been on the wrong side of the bullish run?  Whatever the reason that is stinky.

menchivist's picture

I only been on Zeroh for short time but most people on hte messages are either complaining they can't make any money in markets or are making money with the Shepwave analysis.  I have been following shep and so far so good.

https://www.facebook.com/permalink.php?story_fbid=10155108125820326&id=166578775325

mjcarr51's picture

Almost assuredlythis is the trigger for the meltdown.

idontcare's picture

When can I buy BABA at 50?

Consuelo's picture
"Emerging Markets May Be Suddenly Hit On Multiple Fronts At Once", Trader Warns

Remedial translation:

China is about to crash land (for the 10,000th time since 2008)