Feb 13, 2019

Emerging markets go mainstream

Nearly half of fund managers surveyed by Bank of America Merrill Lynch expect global GDP to fall in 2019 and 55% say they're bearish on both the world's growth and inflation outlook next year.

Why it matters: That's causing many to increase their cash positions, cut back on allocation to stocks and strangely to increase their holdings of emerging market assets.

What it means: Emerging market stocks and bonds are typically thought of as more risky than developed market securities because emerging countries have less deep and less developed capital markets and are often more vulnerable to large swings in volatility.

  • In times of uncertainty, investors typically sell, not buy.

Yes, but: BAML strategists say that despite the overall wall of worry — the U.S.-China trade war tops the list of biggest tail risks cited by investors for the ninth straight month — EM was the most crowded trade for the first time in survey history. That's even more impressive considering shorting EM was the third most crowded trade just last month.

  • But since the third quarter of 2018, EM has not only outperformed developed market peers like the U.S. and Europe, it has been less volatile.

What they're saying: Julian Howard, head of multi-asset solutions at GAM, said on CNBC in August that the market may have reached the peak of the anti-EM trade.

Go deeper: Brazil's deadly dam collapse could shock emerging markets

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Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.

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The big picture: COVID-19 has killed more than 2,860 people and infected more than 84,000 others in over 60 countries and territories outside the epicenter in mainland China. The number of new cases reported outside China now exceed those inside the country.

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Gov. Gavin Newsom. Photo: Kevork Djansezian/Getty Images

A new case of the novel coronavirus in California was announced on Friday after Gov. Gavin Newsom said Thursday that 33 people had tested positive for the virus, noting the risk to the public remains low.

What's new: An adult woman with chronic health conditions in Santa Clara County who "did not recently travel overseas" or come into contact with anyone known to be ill was confirmed to have contracted the coronavirus on Friday by CDC and California Department of Public Health officials.

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Photo: GDC

Next month's Game Developers Conference in San Francisco became the latest tech event to be cancelled or postponed amid growing concerns over the spread of the novel coronavirus.

The big picture: A growing number of events are being scrapped, including Mobile World Congress and Facebook's F8 developer conference. Some, like the giant SXSW event in Austin, insist they are moving forward.