Emerging market recovery to accelerate from here?
Our colleagues at CrossBorder Capital were keen on Emerging Markets ("EM") both this year and last, based on their assessment of liquidity, and so far they haven't been wrong. They first noted a distinct change in the capital flow and liquidity climate in late 2015, which has since been reinforced by both a dramatic improvement in the quality, as well as the quantity, of EM liquidity. In their view, the key to the improvement is what is happening in China, and in particular the steady expansion of the PBOC balance sheet and the greatly improving trend in capital outflows. I also listened in on a bottom-up EM manager's conference call today, who had an equally positive view based on corporate fundamentals and valuations. They pointed out that the world's investors are still significantly underweight EM as an asset class. CrossBorder's commentary is available to purchase here.