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Yield-hungry EM traders seek cue from Trump and Xi

Developing-nation currencies and bonds just staged their best weekly performance since 2017.

Jun 25, 2019, 09.39 AM IST
Emerging markets are entering a pivotal week as investors look to see whether the US and China can find a path toward a trade agreement when their two leaders meet in Japan.

Developing-nation currencies and bonds just staged their best weekly performance since 2017 after the Federal Reserve and the European Central Bank signaled the prospect of looser monetary policy. Now all eyes turn toward President Donald Trump’s meeting with Chinese counterpart Xi Jinping at the June 28-29 summit of Group of 20 nations in Osaka as they try to head off a further escalation in the trade war between the world’s two biggest economies.

“With yields across the developed world getting back to ridiculously lowlevels, it makes emerging-market debt assets all the more attractive,” said Eric Stein, a Boston-based money manager at Eaton Vance Corp., an investment-management firm that oversees about $470 billion globally. “Certainly, there are risks and the G-20 is one of them. It’s tough to know exactly what is priced in for the meeting, but I think the baseline of many market participants is a kick-the-can-down-the-road kind of agreement.”

Risks in the Persian Gulf are also back on investors’ radars, with Iran set to breach a cap on its enriched-uranium stockpile by Thursday, potentially heightening tensions with the US. Trump said Saturday he intends to impose additional economic sanctions on Iran.
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