9 Dec 2014
Commodity prices to be a major theme for EM in 2015 – DB
FXStreet (Barcelona) - According to the Deutsche Bank Research Team, commodity prices might continue to be a major theme in 2015 for EM, as their full impact is yet to materialize.
Key Quotes
“There was no shortage of negative risks for EM assets yesterday: China imports fell unexpectedly; oil prices took another leg down (-4.3% in Brent); 3Q CAD in South Africa came out wider than expected; further damaging headlines on Petrobras; finally, the Greek government announced to bring forward the Presidential election, likely setting up a significant risk event of early parliamentary elections in the coming months. All these – following the bumper US payrolls on Friday – seem to epitomize the variety of challenges EM assets are facing in the year ahead, against which EMFX remains on the first line of defense.”
“We expect EMFX to face yet another difficult year, as non-supportive policies and low growth amplify with a still difficult external backdrop. Still, the challenges will likely ease in comparison with 2014 and we forecast -1% EMFX spot returns vs. the USD (vs. about -9% ytd). In particular, we see a smaller additional re-pricing in USD and oil, and also we expect a mild pickup in EM growth. Lighter positioning and improved valuations should also help once external shocks ease.”
“Commodity prices should continue to be a major theme in 2015, as their full impact slowly materializes. The additional demand from lower energy prices in advanced economies should result in a shift from commodity exporters towards competitive manufacturing economies (benefitting MXN, CE3, KRW, and THB). Net energy importers should also gain from more fiscal latitude, improved consumer and manufacturer positions and lower inflation.”
Key Quotes
“There was no shortage of negative risks for EM assets yesterday: China imports fell unexpectedly; oil prices took another leg down (-4.3% in Brent); 3Q CAD in South Africa came out wider than expected; further damaging headlines on Petrobras; finally, the Greek government announced to bring forward the Presidential election, likely setting up a significant risk event of early parliamentary elections in the coming months. All these – following the bumper US payrolls on Friday – seem to epitomize the variety of challenges EM assets are facing in the year ahead, against which EMFX remains on the first line of defense.”
“We expect EMFX to face yet another difficult year, as non-supportive policies and low growth amplify with a still difficult external backdrop. Still, the challenges will likely ease in comparison with 2014 and we forecast -1% EMFX spot returns vs. the USD (vs. about -9% ytd). In particular, we see a smaller additional re-pricing in USD and oil, and also we expect a mild pickup in EM growth. Lighter positioning and improved valuations should also help once external shocks ease.”
“Commodity prices should continue to be a major theme in 2015, as their full impact slowly materializes. The additional demand from lower energy prices in advanced economies should result in a shift from commodity exporters towards competitive manufacturing economies (benefitting MXN, CE3, KRW, and THB). Net energy importers should also gain from more fiscal latitude, improved consumer and manufacturer positions and lower inflation.”