October 08, 2019

Emerging-Market Investors Don’t Expect an Olive Branch in Trade Talks
(Bloomberg) -- Trade war-hardened emerging-market investors aren’t counting on any breakthrough in trade negotiations as talks between the U.S. and China are set to resume Thursday in Washington.BNP Paribas Asset Management has been reducing its exposure in junk-rated debt, while Union Investments Privatfonds GmbH is favoring investment-grade rated bonds over high-yield debt. And in case any breakdown in discussions triggers a flight to safety, Aviva Investors has been been buying the yen.“We expect another empty-handshake meeting,” said Bryan Carter, London-based head of emerging-market fixed-income at BNP Paribas Asset. Ultimately, no substantive agreement will be reached, he said.Emerging-market stocks rebounded 2.2% since an early September low, when China and the U.S. announced they would hold face-to-face negotiations once again. The rally has since petered out after President Donald Trump said he won’t seek an interim agreement and global growth showed further signs of deterioration as the year-long trade war dragged on. Impeachment proceedings have also spurred concern that it may hinder Trump’s hand in the negotiations.Below are comments from investors and analysts:Maddi Dessner, multi-asset strategist at JP Morgan Asset Management in New York, tells Bloomberg Television:Bar is much lower for U.S.-China trade talks this week than it has been in previous negotiations“Investors are much more conservatively positioned than they were even six months ago,” so there’s not as much of a negative riskTo have exposure to equities, investors can buy futures, stocks or upside calls, which allow them to gain upside in rallies and lose equity risk in their portfolio when market draws downBrendan McKenna, a currency strategist at Wells Fargo in New York:“Trade relations between the U.S. and China will probably get worse before they get better”No trade truce or breakthrough this week, and Trump will probably move forward with plans to increase and impose more tariffsEscalations will hurt EM currencies broadly, especially emerging Asia’s IDR, INR and PHP; High-beta currencies TRY, ZAR, MXN and BRL likely to also come under pressureExpect more downside in the renminbi and more risk-sensitive currencies such as the AUD, NZD, KRWJim Caron, global head of macro strategies at Morgan Stanley Investment Management in New York:Trade tensions put a damper on global growth, and expectations are for continued talks“I don’t think that anybody really expected there to be a grand bargain this week with China”Alejandro Cuadrado, a senior BBVA strategist in New York:Likes being “defensive (USD biased) with a preference for hedging through CLP” ahead of trade talks“Our expectations are low as we don’t see the incentives fully lined up”Prefers hedging through options in LatAm crosses given region’s sensitivity to global trade, lower levels and higher costsSergey Dergachev, senior portfolio manager at Union Investment in Frankfurt:Expectations for a breakthrough are “very low,” though it will be important to see how the meeting will end and the mood during the meetingFuture steps are also crucial, such as when the next round of talks will beDergachev said he’s positioned “mildly defensive,” and is focusing on the credit quality of his holdingsWerner Gey van Pittius, co-head of emerging-market fixed income at Investec Asset Management in London:The trade war will last longer than what the market is hoping because it’s not just about trade. There’s an element in the U.S. that is afraid of “the geopolitical rise of China” and that is much bigger than just trade right nowChina is preparing for the next decade and trying to reduce the impact of the trade war by opening up their markets, attracting capital, and moving away from U.S. influence by selling Treasuries and buying gold. Their time horizon is beyond the U.S. electionsHe is taking a long duration strategy in his bond portfolio as the trade war raises the risk of a recessionCarter at BNP Paribas Asset:Politics are driving the negotiations, and not economicsThe upcoming 2020 presidential election, and impeachment investigations in the House, are the dominant context for the trade meetingCarter said he plans to continue cutting exposure to junk-rated bonds even if there was a positive outcome from the meeting. That’s because the firm doesn’t expect any comprehensive agreement will be reached that would reverse the negative economic effects of the trade warMark Haefele, global chief investment officer at UBS Global Wealth Management in Zurich, tells Bloomberg Television:Base case is for tensions to neither worsen or improve much, with the U.S. to go ahead with the announced additional tariffsUBS Global is underweight equities globally at this time; the trade impact will be felt hardest in Europe and emerging markets, while the S&P will probably be range-boundStuart Ritson, emerging-market bond fund manager at Aviva Investors in Singapore:It is hard to be too optimistic on the outcome of trade talks given the narrow scope of the discussionsThe firm’s local-currency bond portfolio is “relatively defensive” at the moment, given the weak global growth backdrop. It is also positioned for further easing by EM policy makers and has increased exposure to the yen, given its anti-cyclical properties, and still attractive valuationsRobert Carnell, chief economist for Asia Pacific at ING Groep NV in Singapore, writes in a note:China may see it as advantageous to keep the trade war alive, but under control, pending political developments in the U.S.For the U.S., the benefits of fighting China on trade may now be outweighed by the short-term hit to the economy, in terms of popular support and potential votes for Trump at next year’s presidential electionStephen Innes, an Asia-Pacific market strategist at AxiTrader, writes in a report:In the absence of a significant catalyst, Asian currencies will continue to track the yuan, which remains the best global barometer for trade war riskHeadline risk will continue to influence trading flows in the Chinese currency(Updates with analyst comments throughout)\--With assistance from Sydney Maki, Aline Oyamada, Chester Yung, Netty Ismail and Carolina Wilson.To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.netTo contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Karl Lester M. YapFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Related Stories
Latest News
Top news around the world
Coronavirus Disease

Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus.

Most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment. Older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness.

Around the World

Celebrity News

> Latest News in Media

Watch It
Britney Spears & Sam Asghari "Love" Quarantining Together | In The Room | E! News
May 27, 2020
fcnjuvjGzB0
Celebrity Kids Who Are Successful Like Their Parents | E! News
May 27, 2020
wIFZJwQT-7M
Jimmy Fallon Apologizes for "SNL" Blackface Sketch | E! News
May 26, 2020
LIr5ab7EmVs
Ellen DeGeneres Flirts with Portia in Porsche During Quarantine Dinner Run | TMZ
May 27, 2020
2fWlmT9YM5c
Hailey Bieber Attacked By Her And Justin's Cats | TMZ
May 27, 2020
y8ZZ09zILqM
Pigeon Flies Into Tom Holland's Home, He Names It Will Smith | TMZ
May 27, 2020
TaFV_cDk3Nw
Scott Disick and Sofia Richie break up after nearly 3 years together | Page Six Celebrity News
May 27, 2020
J2VeLS4nX24
Find out how 'Never Have I Ever' star Darren Barnet gets those abs | Page Six Celebrity News
May 27, 2020
MrXtZMCxwCg
Richard Herd, ‘Seinfeld’ and ‘Star Trek’ actor, dies at age 87 | Page Six Celebrity News
May 27, 2020
7JrdeJjIf9g
Gabrielle Union on 'America's Got Talent' Toxicity, Why She Doesn't Regret Speaking Out
May 27, 2020
2KaefM_QT-Q
'Brockmire' Stars Amanda Peet, Hank Azaria Reflect on Series Finale and Onscreen Chemistry
May 26, 2020
XcG_gLdG-Gk
Marcia Gay Harden talks 'Barkskins," "Moxie," and Working With Amy Poehler
May 26, 2020
Gae-emoK8A0
TV Schedule
Late Night Show
Watch the latest shows of U.S. top comedians

Sports

Latest sport results, news, videos, interviews and comments
Latest Events
08
Mar
ITALY: Serie A
Juventus - Inter Milan
08
Mar
ENGLAND: Premier League
Manchester United - Manchester City
08
Mar
ENGLAND: Premier League
Chelsea - Everton
08
Mar
SPAIN: La Liga
Real Betis - Real Madrid
08
Mar
ITALY: Serie A
AC Milan - Genoa
07
Mar
ENGLAND: Premier League
Burnley - Tottenham Hotspur
07
Mar
ENGLAND: Premier League
Arsenal - West Ham United
07
Mar
SPAIN: La Liga
Barcelona - Real Sociedad
07
Mar
ENGLAND: Premier League
Liverpool - Bournemouth
07
Mar
SPAIN: La Liga
Atletico Madrid - Sevilla
01
Mar
SPAIN: La Liga
Real Madrid - Barcelona
01
Mar
ENGLAND: Premier League
Everton - Manchester United
01
Mar
ENGLAND: Premier League
Tottenham Hotspur - Wolves
01
Mar
SPAIN: La Liga
Espanyol - Atletico Madrid
01
Mar
ITALY: Serie A
Cagliari - Roma
29
Feb
ENGLAND: Premier League
Watford - Liverpool
29
Feb
ITALY: Serie A
Napoli - Torino
29
Feb
ENGLAND: Premier League
Bournemouth - Chelsea
24
Feb
ENGLAND: Premier League
Liverpool - West Ham United
23
Feb
ENGLAND: Premier League
Arsenal - Everton
23
Feb
ENGLAND: Premier League
Manchester United - Watford
23
Feb
ITALY: Serie A
Roma - Lecce
23
Feb
SPAIN: La Liga
Atletico Madrid - Villarreal
22
Feb
SPAIN: La Liga
Levante - Real Madrid
22
Feb
ITALY: Serie A
Fiorentina - AC Milan
22
Feb
ENGLAND: Premier League
Leicester City - Manchester City
22
Feb
ITALY: Serie A
Spal - Juventus
Find us on Instagram
at @feedimo to stay up to date with the latest.
Featured Video You Might Like
0vmRhiLHE2U JFCZUoa6MYE UfN5PCF5EUo 2PV55f3-UAg W3y9zuI_F64 -7qCxIccihU pQ9gcOoH9R8 g5MRDEXRk4k tudKp5Vhs3k iwWHibhssSo kQr0XHPbICM 5NeCb7JxaRk
Copyright © 2020 Feedimo. All Rights Reserved.