What does 2017 hold in store for EM? - Commerzbank

Analyst, Peter Kinsella at Commerzbank, expects better EM aggregate growth in 2017 and thinks that the EM as a whole should illustrate growth prints in the region of 4.6%.

Key Quotes

“Inflation prints should remain relatively subdued and where we see increasing inflation prints these will be largely a reflection of FX pass through effects. We expect broad EM currency weakness, which is largely a reflection of the stronger USD. We do not expect severe capitulations like we experienced in 2015. EM real rates are higher than before and external balances show significant improvements. Those EM’s with the poorest real rate – balance of payments metrics can expect the most severe FX depreciations. TRY and ZAR stand out in this regard.”

“In rates space we think that hard currency bonds will underperform until the market has fully digested the combination of the Fed’s rate hiking cycle and the implications of the Trump presidency.”