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Russia, China most attractive in 2014, says East Capital's Svedberg
East Capital’s chief economist Marcus Svedberg has picked out Russia and China as among the most attractive markets next year, as he sees continued divergence in performance levels.
We believe in a modest global economic recovery in 2014. One result of the recovery will be that some of the monetary stimulus programs will start to be wound down during the course of the year. At the same time, there are plenty of remaining issues in the US and eurozone, but we do not see any systemic risks. We do expect some of the emerging market pessimism to linger. And we also believe that commodity prices will continue to ease somewhat, partly as a result of USD appreciation.
Eastern Europe, which broadly follows the global trend, will experience a moderate economic acceleration in 2014, from a relatively low base. Although the divergence in terms of economic growth has reduced lately, there are important differences in terms of external support and vulnerability. On balance, we find Russia to be one of the most attractive macro stories in 2014, while Turkey looks like one of the riskier. Central Europe is attractive from a macro perspective, but risky from a regulatory standpoint. We expect continued divergence in the frontier economies.
The macro situation in Asia is expected to show an uneven growth outlook from a relatively uneven base. The investors' rotation that began in 2013, favouring North Asia over South Asia, will probably continue, especially if China starts delivering on its promises to implement a very ambitious reform program, which we believe it will. The improvement of the Japanese economy following the Japanese quantitative easing will also continue to give spillover effects in the region. Still, several ASEAN countries are more vulnerable to US tapering and also enter 2014 with relatively high valuation levels, both from a regional and historical average perspective. The situation can however change quickly, and we do believe in the strong potential of ASEAN in the medium to long term.
We find Russia and China as the most attractive markets from a top down perspective. We are, however, conscious of the fact that financial markets do not trade on fundamentals alone. Even though some of the excitement about frontier markets has reduced, we see substantial upside for selected frontier markets in emerging Europe and Asia. So, on balance, we expect 2014 to be another divergent year.
- By: Marcus Svedberg
- 05 Dec 2013
- 0 Comments
East Capital’s chief economist Marcus Svedberg has picked out Russia and China as among the most attractive markets next year, as he sees continued divergence in performance levels.
We believe in a modest global economic recovery in 2014. One result of the recovery will be that some of the monetary stimulus programs will start to be wound down during the course of the year. At the same time, there are plenty of remaining issues in the US and eurozone, but we do not see any systemic risks. We do expect some of the emerging market pessimism to linger. And we also believe that commodity prices will continue to ease somewhat, partly as a result of USD appreciation.
Eastern Europe, which broadly follows the global trend, will experience a moderate economic acceleration in 2014, from a relatively low base. Although the divergence in terms of economic growth has reduced lately, there are important differences in terms of external support and vulnerability. On balance, we find Russia to be one of the most attractive macro stories in 2014, while Turkey looks like one of the riskier. Central Europe is attractive from a macro perspective, but risky from a regulatory standpoint. We expect continued divergence in the frontier economies.
The macro situation in Asia is expected to show an uneven growth outlook from a relatively uneven base. The investors' rotation that began in 2013, favouring North Asia over South Asia, will probably continue, especially if China starts delivering on its promises to implement a very ambitious reform program, which we believe it will. The improvement of the Japanese economy following the Japanese quantitative easing will also continue to give spillover effects in the region. Still, several ASEAN countries are more vulnerable to US tapering and also enter 2014 with relatively high valuation levels, both from a regional and historical average perspective. The situation can however change quickly, and we do believe in the strong potential of ASEAN in the medium to long term.
We find Russia and China as the most attractive markets from a top down perspective. We are, however, conscious of the fact that financial markets do not trade on fundamentals alone. Even though some of the excitement about frontier markets has reduced, we see substantial upside for selected frontier markets in emerging Europe and Asia. So, on balance, we expect 2014 to be another divergent year.
