Foreign Currency Reserves of These 5 Asian Nations Have Hit Record Highs

The US dollar has been weakening since late 2016. The PowerShares DB US Dollar Index Bullish Fund (UUP) has declined 8.1% on the year while the PowerShares DB US Dollar Index Bearish Fund (UDN) is up 8.3% in YTD 2017. This weakness has been a boon to emerging markets in more ways than one.

Emerging markets have been tapping international markets with bond issuances and have witnessed enhanced interest, allowing them to raise money at lower rates than normal. Emerging market bonds denominated in local currencies have outperformed their hard-currency peers, and central banks have seen their international reserves swelling.

Impact on Asia

The graph above plots the top 10 Asian nations in terms forex reserves at the end of 2016. Reserves held in gold or as Special Drawing Rights (SDRs) with the International Monetary Fund (IMF) are not part of the numbers presented.

The first six countries are also among the world’s top 10 markets in terms of forex reserves with China and Japan being the top two on that list by a significant margin; Switzerland is a distant third.

Given that Asia dominates the emerging markets landscape, the impact of a weak dollar has benefitted developing countries from the continent substantially.

Strongest on record

The graph below plots the top five emerging nations from Asia which have seen their forex reserves rise to record levels.

The graph shows growth in international reserves over the past 12 months as well as their level.

Including gold reserves, India’s forex reserves have crossed the $400 billion mark for the first time in its history. India’s imports had stood at $384 billion in fiscal year 2016-17 (Apr-Mar) according to Ministry of Commerce data. This equates to India now having enough international reserves to cover a year’s worth of imports.

For Indonesia, its total forex reserves stood at $128.8 billion in August, and according to Bloomberg, this is enough to cover 8.6 months of imports and government external debt repayments.

Building these reserves could be of great benefit to emerging Asian countries in the near future. We’ll explain how in the next article.

Tracking The Greenback In Order To Invest In Emerging Markets Equities and Bonds

The US dollar has weakened for most of YTD 2017. This is reflected in the performance of ETFs tracking the greenback.

While the PowerShares DB US Dollar Index Bullish Fund (UUP) is down 8.6% for the year, the PowerShares DB US Dollar Index Bearish Fund (UDN) is up nearly 9%.

In the previous two articles of this series, we’ve established the visible relationship between the greenback and emerging markets equities and bonds. So, if the dollar strengthens, what impact can it have on these instruments?

Emerging markets equities

Since the turn of the century, emerging markets equities have done well when the dollar has weakened. So does that mean that a strengthening dollar spells doom for them?

Not necessarily.

If the strengthening dollar is driven by a surging economy, then a portion of the funds invested in emerging markets will move back to the US. However, given the vast universe of emerging markets, there will be pockets which will continue to provide value. In such a case, reducing exposure to broad-based funds and increasing investments in certain countries could be beneficial.

On the other hand, if the dollar strengthens due to certain developments or announcements such as the US Presidential election last year, it may not impact emerging markets equities. There can be temporary volatility, but no persistent trend of outflows.

Another aspect to note is the decoupling of some emerging markets with the US compared to a decade ago. Though a strong dollar can result in some capital outflows, emerging nations that don’t rely on the US for exports will bear the brunt better than others.

Emerging markets bonds

In the universe of emerging markets bonds, those denominated in local currencies can be at serious risk of falling in value if these currencies weaken against the dollar.

Though the entire universe would suffer because a strong dollar normally triggers outflows from relatively risky emerging markets bonds to the safety of US treasuries, bonds denominated in local currencies can expect to experience a harder landing than those denominated in hard-currency.

A major reason why the asset class suffers is because a weaker dollar typically leads emerging market governments and corporates to raise debt overseas, which, if denominated in dollars, would make it expensive to service, thus increasing their risk. At such a point, the reward does not compensate for the risk, resulting in outflows.

Similar to equities, a strong dollar backed by a strengthening economy would have a bigger negative impact on emerging markets bonds vis-à-vis a short-term upward movement.

Recently, the US Federal Reserve surprised the market by deciding to begin reducing the size of its balance sheet. This fanned the dollar which has since begun rising.

If US economic indicators back this aggressive stance of the central bank, then emerging market bonds will see outflows. A major trigger will be a rise in inflation expectations in the US, which will impact the US Treasuries yield curve.

If this does not happen, then some pockets of emerging markets will still remain attractive due to the higher yields they continue to offer.

5 Mexican ADRs With Attractive Valuations Since Trump Entered The White House

Mexican ADRs are commanding increased investor interest

Mexico’s stock market has been commanding increased investor interest ever since President Donald Trump set foot in the White House. His protectionist pledges against Mexico have weighed down the Mexican peso sharply against the US dollar (UUP). Mexican equities on the local stock exchange, as well as listed ADRs trading on the US stock market (SPY) (IWM), had taken a hit. The Mexican equity-tracking iShares MSCI Mexico Capped ETF (EWW) touched its 5-year low ($42.64 a share) on January 16 this year. The Mexico Fund, Inc. (MXF) and the Mexico Equity & Income Fund Inc. (MXE) are other US-listed funds providing exposure to Mexican equity.

Top 5 Mexican ADRs

ADR Ticker Name Sector – Industry P/E P/B YTD Return%
BSMX Grupo Financiero Santander Mexico SAB de Financials- Bank 13.81 2.21 47.25
CX Cemex SAB de CV Materials- Construction 13.83 1.48 20.79
MXCHF/

MXCHY

Mexichem SAB de CV Materials- Chemical 14.69 2.01 20.25
BRGGF Banregio Grupo Financiero SAB de CV Financials- Bank 14.53 2.74 16.32
GBOOF/

GBOOY

Grupo Financiero Banorte SAB de CV Financials- Bank 17.18 2.54 45.87
Note: Returns and ratios relate to data as of August 10, 2017

 

Stock market recovering, economic indicators favorable

However, the markets appear to have recovered from their January abyss now; the EWW is up 30% since January 16 (as of August 10). Moreover, economic indicators seem to be putting Mexico in a favorable light; GDP growth gradually gaining, unemployment is low , inflation has been rising fuelled by consumer spending, and the country’s balance of trade position is substantially better now.

However, Mexican equity still has a long way to go before it sees its market recovering to levels seen before the oil price plunge in mid-2014. The price of oil matters to Mexico as oil revenues make up close to 10% of the Latin American (ILF) economy’s export earnings. The EWW had seen trading in $65-$70/share range until the third quarter of 2014.

US investors seeking bargain opportunities

Now, while Mexican equities take their time to gain pace as they tread northward, long-term investors are seeking out bargain opportunities. For US investors, there are a lot of Mexican companies which have their ADRs trading on the US exchanges. We filtered the list for you, to arrive at the top 5 Mexican ADRs currently trading at the most attractive valuations on the US exchanges. These include 2 companies from the materials sector and 3 from the financial sector (see table above).

Local Currency Emerging Market Bonds Are Seeing Green as the Greenback Sees Red

While investing in emerging market bonds and instruments that track these securities, investors have a choice of opting for bonds denominated in US dollar or the local currency of the source nation.

Given the simplicity of investing and the diversity of offerings, we’ll focus on exchange-traded funds which provide exposure to a pool of emerging market debt rather than stand-alone bonds.

Dollar impact on fixed income funds

The US dollar has been in decline since the beginning of the year. The PowerShares DB US Dollar Index Bullish Fund (UUP) is down 5% since the beginning of 2017. This means that some emerging market currencies have made noticeable gains against the dollar.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is the largest ETF which invests in dollar-denominated emerging market bonds. The fund has provided returns of 6.9% in YTD 2017. The Vanguard Emerging Markets Government Bond ETF (VWOB) also invests in dollar-denominated securities and has returned 6% in the same period.

These are considerable returns from the fixed income asset class. However, they are far behind their local currency-denominated peers.

The VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (EMLC), the iShares J.P. Morgan EM Local Currency Bond ETF (LEMB), and the WisdomTree Emerging Markets Local Debt Fund (ELD) invest in local currency-denominated bonds. They have returned 10.5%, 9.5%, and 9.6% respectively in YTD 2017.

Weighing the currency factor

As can be seen from the analysis above, the movement in the greenback is vital to choosing the appropriate fund in the emerging market bonds asset class. In fact, there are cases like that of Brazil and Russia, whose strengthening currencies have contributed more to the ETFs than the actual bond holdings themselves.

Earlier in the year, President Trump had said that the dollar was “too strong.” A weaker dollar would boost US exports, but at the same time, boost some emerging market currencies as well, thus proving beneficial to local currency-denominated emerging market bonds and funds.

The fact that emerging market assets have been taking monetary policy tightening by the US in stride also bodes well for these bonds.

What investors need to keep in mind though, is that currency movement vis-à-vis the dollar needs to be seen on a case-by-case basis.

However, one concern is taking over investor sentiment when it comes to investing in these markets. Apart from the valuations appearing stretched in some cases, other risks are quickly piling up, and quickly becoming a cause for concern. Let’s look at that aspect in the next article.

3 Charts Indicate the Emerging Markets Currency Surge May Be Ending

The emerging markets currency party

While investors in emerging markets (EEM) (VWO) continue to enjoy the surge in currencies so far this year, many are beginning to look for structural weaknesses. The WisdomTree Dreyfus Emerging Currency Strategy ETF (CEW), the WisdomTree Chinese Yuan Strategy ETF (CYB), and the Market Vectors-Indian Rupee/USD ETN (INR) are just a few of the listed funds invested in emerging markets currency. Returns from these funds so far this year are charted below:

Ticker Fund YTD Return (as of May 25)
CEW WisdomTree Dreyfus Emerging Currency Strategy ETF 6.55%
CYB WisdomTree Chinese Yuan Strategy ETF 4.6%
INR Market Vectors-Indian Rupee/USD ETN 8.79%

Local-currency debt has soared

The surge in emerging markets currencies is also behind the attractiveness of emerging market local-currency debt. The iShares Emerging Markets Local Currency Bond ETF (LEMB) and the Market Vectors Emerging Markets Local ETF (EMLC) have returned 8.2% and 6.9%, respectively, YTD (as of May 25). 2016 saw a record $506 billion of local-currency emerging market bond issuances, up 32.5% from 2015, according to Bloomberg data. And, we’re seeing investors continuing to pile into emerging market debt this year.

What could bring the rally to an end?

However, those invested in emerging markets currency remain watchful of the peak. Three things that could reverse the trend easily are:

  1. US growth (SPY) (IWM) momentum accelerating, leading to a stronger US dollar (UUP)
  2. Volatility in commodity prices
  3. Change in investor sentiment towards emerging market assets

 

In this series, we’ll review three charts which seem to signal that the emerging markets currency surge may be on it’s last leg. Let’s begin with the emerging markets currency-commodity spread, as discussed in the next part of this series.

17 Of 24 Emerging Market Currencies Have Appreciated This Year, Is The Rally Just Getting Started?

Emerging markets up 18.8% YTD! So far so good

Emerging market currencies have largely been on a roll this year. For the year as of May 25, we’ve seen a total of seventeen emerging market currencies (of a total of 24) record gains. Foreign exchange rate movements are affected by fund flows to a significant extent.

On a YTD (year-to-date) basis, we’ve seen emerging markets (VWO) stock markets largely outperforming the US and other developed markets. As of May 25, the iShares MSCI Emerging Markets ETF (EEM) was up 18.8%, as compared to the SPDR S&P 500 ETF (SPY), which returned 8.2% to investors and the developed markets tracking iShares MSCI EAFE Index ETF (EFA) which gained 14.7% for the year. According to HSBC: Emerging Market Equities Could Gain 20% Through Year-End. Investors piling into these emerging market assets has also led to an appreciation in emerging market currencies against the greenback (US dollar (UUP)).

The Mexican peso leads the emerging-market currencies rally

The chart above depicts the 24 emerging market currencies we analyzed. The list is comprised of countries in the MSCI emerging market index classification. The chart above clearly depicts the surge in the majority of emerging market currencies so for in the year.

The Mexican peso has been leading the rally, appreciating by 12.7% YTD (as of May 25). This is despite the protectionist pledges by the US President Donald Trump who assumed office the White House at the beginning of the year. While the markets expected the withdrawal by the United States from the TPP to impact Mexico back in January, it turns out that no barriers have been able to arrest the rise of the Mexican Peso.

The Polish zloty is another forerunner with 12.7% appreciation YTD. The Czech koruna, Russian ruble, and Korean won follow next with 9.1%, 9.1%, and 7.9% appreciation recorded, respectively for the year so far.

Currencies against the trend

Currencies that have swayed against the general trend in the emerging market currency basket are: the Turkish lira, which has depreciated by 0.9%; the Brazilian real which is down by 0.7%, and the Philippine peso, the Chilean peso, and the Qatari riyal, which have depreciated by 0.5%, 0.3%, and 0.003, respectively YTD.

While emerging market currencies have largely been on a tear, is it time now to get cautious about the high tide? The next part of this series explains.

Trump Warns Dollar Is Too Strong: Here’s Where Emerging Market Currencies Go From Here

Dollar is “too strong”

US President Donald Trump is of the opinion that the dollar (UUP) “is getting too strong.” He expressed his opinion while in conversation with The Wall Street Journal.

He went on to express that “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting—that will hurt ultimately.” He was also quoted as saying, “Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good.”

The greenback had risen after the Presidential election in November due to his views on a boost to infrastructure spending and tax cuts. However, since then it has come down, leading to emerging market currencies doing quite well.

What can Trump’s statement mean for currencies?

Theoretically, his statement could mean further strengthening of emerging market currencies. This would be good for those countries and firms who have a lot of debt denominated in the greenback. A weaker dollar would make these debts cheaper to service.

However, pushing the dollar down would be easier said than done. The US economy has been becoming stronger, which will reflect on the US dollar. Further, the dollar is also expected to rise in a rising interest rate environment in the US.

Though the expected slow pace of rate hikes in the US may not be enough to make the dollar stronger, what can have this effect is the divergence in the monetary policies between the US vis-à-vis Europe and Japan, whose currencies are chief components of the dollar index. Expansionary monetary policies being followed by these nations, as compared to contractionary policy being followed by the US Federal Reserve, can push the dollar higher.

Further, a weaker domestic unit works in the favor of these and other nations whose economies are struggling to grow. A weaker currency makes their exports more competitive in the international market, thus assisting improved export numbers.

Next, let’s take a look at the popularity of emerging market bonds.

Kyle Bass: Impossible For Multi-National Corporations To Get Money Out of China for Months Now

Capital controls in China: the bright side

Over the recent past, Chinese buyers have been increasingly engaging in M&A activities (MNA) (MRGR) abroad, some with the sole purpose of financial diversification. These types of deals allow the investor to partake in the price return and payouts of the firm while paying little or no heed to the synergy generated.  Moreover, such outbound fund flows exert a downward pressure on the currency.

The Chinese yuan was the worst performing major Asian currency in 2016, down 6.5% for the year. Consequently, China strengthened capital controls in the form of restrictions on overseas investments and additional charges on remittances to support its currency, the yuan, at the start of 2017. Since the beginning of this year, the yuan has shown some recovery, appreciating from 6.943 Chinese yuan to one US dollar (UUP) (as of Dec 30, 2016) to 6.898 yuan to one US dollar as of April 7, 2017.

Capital controls in China: the flipside

Now let’s take a look at the flip side here. Capital control measures imposed by the authorities in China have led to a slump in M&A investments from the region. According to a McKinsey study, China’s M&A activity abroad receded by as much as 64% (from $86 billion in 1Q16 to $31 billion in 1Q17) due to capital control measures adopted and imposed by the Asian (AAXJ) nation. The foreign exchange issue has significantly cooled off deal activities in the first quarter,” commented Paul Gao, Senior Partner, McKinsey.

Kyle Bass: impossible for multi-national corporations to remove money from China

While on one hand China’s foreign exchange regulator is urging multinationals such as IBM (IBM), Visa (V), Pfizer (PFE), Sony (SNE), BMW (BMWYY), Daimler, and Shell (RDS-A) (RDS-B), to cooperate in the management and control capital flow out the economy, their capital controls have also made it very difficult for multinational corporations to handle remittances and outbound flow of money from their business, as well as investments. This was reiterated by a recent statement by hedge fund manager Kyle Bass, “The Chinese have made it impossible for multi-national corporations to remove money from China (FXI) (YINN) (ASHR) (MCHI).”

“One Belt, One Road” hits a speed bump 

Moreover, tightening capital controls are also leading to delays in the financing of projects that are a part of China’s ambitious “One Belt, One Road” initiative. Companies could require as much as 3-6 months to get financing approval from China for many of the Silk Road projects on account of the additional documentation and explanations that are now required.

No Barriers Have Been Able To Arrest the Rise of the Mexican Peso

Leaping over the wall

We still don’t know whether there will be a border wall between the US and Mexico, but for now, the Mexican peso has certainly leaped over the hypothetical barrier between the US and Mexico that has been in place since Donald Trump’s election campaign.

The peso, which was the worst hit emerging market currency in the aftermath of Donald Trump’s victory on November 8, has staged a remarkable comeback in 2017. Against the US dollar (UUP), the peso has strengthened to a level not seen since the US election last November. In the graph below, the decline represents a strengthening peso against the greenback.

Reasons for the rise

Part of the reason for its rise can be attributed to the Federal Reserve’s projection for an easy pace of rate hikes, which has benefitted emerging market assets in general. Given the strong state of the US economy, there were worries that the Fed may accelerate the pace of rate hikes, but it has since signaled that it would remain on the original path set out for this year.

Another major factor fueling the rise of the Mexican peso is a softer tone adopted by US officials as far as trade ties with Mexico are concerned. Soothing comments from Trump’s advisor Peter Navarro and Commerce Secretary Wilbur Ross for better engagement with Mexico and coordination between the three NAFTA signatories has been immensely beneficial to the peso.

Views on the peso’s future

Bloomberg reported that Citigroup strategists, led by Dirk Willer feel that the sizable inflows into the Mexican peso are “clearly not sustainable.” The team feels that unless leveraged investors buy the peso “in a meaningful way,” the currency looks headed for a fall.

BBVA has revised its year-end forecast for the peso to 20.50 from 21.50 per dollar, as reported by Bloomberg, as the bank feels that NAFTA risk has declined. In the short-term, BBVA expects the peso to remain strong because the country’s central bank is expected to hike interest rates in March.

UBS feels that the peso is still attractive due to the aforementioned softer stance of the US on trade relations with Mexico. Bloomberg reported that the bank has revised its forecast for the peso to 19, 18.5 and 18 for three, six and 12 months, respectively, from 21.5, 19.5 and 19 earlier.

Hence, it seems that the general perception about the Mexican peso is that it can get stronger against the dollar. The dollar itself has been weakening after the policy announcement by the Federal Reserve on March 15.

After looking at Mexican equities in the first article and the peso in this one, let’s look at whether Mexican assets are still attractive in the next article.

The Greatest Risk Facing Latin American Economies Is the One We Cannot See

The risk we cannot see

Latin American equity has been a strong performer thus far this year. The iShares Latin America 40 ETF (ILF) has returned 12.7% so far this year (as of March 23), an outsized driver of emerging market (EEM) (VWO) performance. The rally, driven by the commodity price rebound has been instrumental in driving up the stock market. The market upswing and the continued preference for emerging market debt seems to indicate that investors in the Latin American economies are shrugging off the near-term risks posed by the Trump administration.

[stockdio-historical-chart stockExchange=”NYSENasdaq” width=”100%” symbol=”ILF” compare=”EEM” displayPrices=”Lines” performance=”true” from=”2017-01-01″ to=”2017-03-23″ allowPeriodChange=”true” height=”350px” culture=”English-US”]

Pockets of uncertainty

However, the greatest risk facing the Latin American economies is the one we cannot see, said Arthur Rubin, Head of Latin America Debt Capital Markets, SMBC Nikko Securities America, Inc., during a March 23 interview with Bonds & Loans. There remain pockets of uncertainty, says Rubin. “The new norm under the Trump administration maybe pockets of uncertainty, driven by unpredictable and unforeseen policy initiatives that don’t really last that long.” The markets are already pricing in the rate hikes expected in the U.S. However, in the event of a policy occurrence beyond the expected, emerging markets such as those placed in Latin America, stand more exposed to risk of possible repercussions.

Local-debt winning investor favor

While Rubin does agree that the volume of international debt issued globally is on the rise, he doesn’t see Latin American economies such as Colombia (GXG) (ICOL), Peru (EPU), and Chile (ECH), taking the plunge, just yet. Credit spreads, which are beginning to tighten for many economies, are still wide enough for certain LatAm economies.

Local currency emerging market debt is already flying high amid U.S. policy reshuffle. The current and expected U.S. policy reshuffle including monetary policy tightening, along with protectionist curbs are expected to strengthen the U.S. dollar (UUP), which works against holders of emerging market (EEM) (VWO) dollar-denominated debt which gets expensive with a rising dollar. This is when local-currency debt takes center stage as the instrument that is immune to such policy risk.

Local Currency Emerging Market Debt Is Flying High After U.S. Policy Reshuffle

Local-currency debt gaining preference

With improving fundamentals and reduced riskiness (as discussed in Part 1), emerging market debt continues to gain investor favor. Issuances reached a record high in 2016, with 2017 expected to break the record.

Another notable trend is the increasing number of investors that are piling into emerging market debt (EMB), with local-currency debt (LEMB) (EMLC) being preferred over dollar denominated debt. The current and expected U.S. policies reshuffle including monetary policy tightening, along with protectionist curbs. Both are expected to strengthen the U.S. dollar (UUP), which works against holders of emerging market (EEM) (VWO) dollar-denominated debt which gets expensive with a rising dollar. This is when local-currency debt takes center stage as the instrument that is immune to such policy risk.

Up 13.3% over the past year

Over the past year, the iShares Emerging Markets Local Currency Bond ETF (LEMB) has returned 13.3% (as of March 21), as compared to the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) which has yielded about 5%. Year to date, these ETFs are up 7.2% and 2.4%, respectively. The LEMB tracks a market-value weighted index of sovereign debt denominated in issuers’ local currencies. The emerging market bond investor’s preference is clearly towards local-currency bonds, as they are better immune to any interest rate hikes by the US Fed, as well as any protectionist directives issued by the Trump administration in the US.

So far in 2017, local-currency debt has provided double the returns provided by dollar-denominated emerging market debt. Investors have already invested about $4.5 billion into local-currency debt so far this year, according to EPFR Global.

Fund houses piling into local debt

About 41.5% of the LEMB fund is held by institutional investors. Schroder Investment Management Group, Blackrock Fund Advisors (BLK), and Morgan Stanley (MS) count amount the top 3 holders of the funds’ shares. According to Abdallah Guezour, a fund manager for Schroders emerging market debt, “investors should be flexible and opportunistic in local debt markets now.” For local debt, Guezour’s preference is towards Argentina (ARGT), Brazil (EWZ), Russia (RSX), South Africa (EZA), Indonesia (EIDO) and Mexico (EWW). Ashmore Group prefers Brazil’s local debt.

Man Group Plc (MNGPY), the leader in listed hedge funds, is investing in local-currency bonds. Units of BNP Paribas and JPMorgan Chase (JPM) have already turned bullish on local-currency debt.

We’re also seeing a number of sovereign issues from the emerging markets surfacing. Saudi Aramco is looking to raise $2 billion in riyal-denominated Islamic bonds (aka sukuk) in the second quarter of this year. The sukuk sale is said to be part of its $10 billion debt program. Nigeria is set to launch local currency green bonds in April.

Protectionism in Western Markets Not Cause for Caution in Emerging Asia

Do you need to be worried?

In the previous article, we saw that countries from emerging Asia in general are much more indebted that those from other regions. The question is, with US tightening its monetary policy, should investors continue to remain in emerging Asia?

To answer this question, let’s look at how the dollar (UUP) has reacted since the US Federal Reserve raised the federal funds rates on March 15.

Even after a rate hike in a situation where economic growth is gaining ground, the dollar index has fallen against its peers as seen in the graph above. In fact, intraday on March 21, the index fell below the 100 mark.

The primary reason for the fall in the dollar post the monetary policy meeting is the Federal Reserve’s outlook on future rate hikes. The central bank expects to remain on a slow path to interest rate normalization, projecting only two more rate hikes this year. This allayed market fears of a sharper-than-expected pace of rate hikes given the strong economic conditions in the US, and has been the chief cause of emerging equities (EEM) (VWO) performance as well.

Looking at the bigger picture

Emerging Asia, similar to many other regions, is not immune to worries such as calls of trade protectionism from the US, a possible reduction in outsourcing jobs, and other policies which can boost the dollar in the short-term. But investors would do well to look at countries from emerging Asia and their investment horizon before deciding whether to stay invested or move out.

Asian nations are expected to power global economic growth going forward. According to the January 2017 update to the World Economic Outlook, the International Monetary Fund expects Emerging and Developing Economies to grow 4.5% this year.

While Emerging and Developing Europe is expected to grow 3.1%, economic growth in Latin America and the Caribbean is expected to be 1.2%. At the same time, Emerging and Developing Asia is expected to gallop to 6.4%.

Apart from macroeconomic factors, which can only work as facilitators in attracting interest, investors would notice that emerging markets of today are quite different from those of a decade earlier. A number of major  fund managers highlight these aspects and remain bullish on emerging markets.

Specifically speaking of emerging Asia, Robert Horrocks from Matthews Asia believes that there is no reason to scale back investments in Asia.

He states that “although political parties in Europe, the U.K. and the U.S. seem particularly polarized—with nationalism, anti-immigration, protectionism and mercantilism still dominant themes in attracting votes—there are some things that these trends can’t change, such as Asia’s savings, productivity and growth.”

With the dollar yet to pressure emerging market currencies, and with relatively cheap valuations backed by macroeconomic fundamentals, it seems that emerging Asia will remain a well sought after market.