新兴市场-股票策略-回到低点，关于股权集中出售的5个问题.docxVIP

EM Strategy ViewsBack EM Strategy Views Back to the lows, 5 Questions on the Equity-centric Sell-off (1) What is the latest pulse-check on EM equity after the recent drawdown? Fundamentals (earnings) are slowing but growing, valuation is supportive, and positioning is not as crowded as many investors fear. But there is no clear upside catalyst. Investors are focused on China as a fiscal easing would be a clear catalyst for broader EM growth improvement, and HYPERLINK /content/research/en/reports/2018/10/09/3f13b7ef-8d0f-4355-800b-921c6f100603.html credit growth has stabilized HYPERLINK /content/research/en/reports/2018/10/09/3f13b7ef-8d0f-4355-800b-921c6f100603.html sequentially, but a stimulus similar to 2009 or 2016 seems unlikely in the For For the exclusive use of HYPERLINK mailto:DAI.YONGYI@ICBCCS.COM.CN DAI.YONGYI@ICBCCS.COM.CN (2) If growth is the primary driver of EM, how can we gauge the path ahead vis-a-vis China and US rates? The recent move in US 10-year rates adds further downside risks to EM growth as we finish 2018, and China’s easing on monetary is less helpful than an “old-school” fiscal boost. In recent years, EM GDP forecasts move with a beta of ~1.2x relative to China GDP forecasts, and we are 20bp below Consensus expectations for 2019. The relationship is a bit tenuous, but a 50bp rise in US 10-year rates signals downside risk of ~60bp to EM growth with a 6-month lag. Outside these factors, a bull case for EM growth relies on mean-reversion (slowdowns happen quite often and usually do not lead to recessions), early cycle dynamics, and improving DM growth “pulling up” EM economies. (3) Is the recent EM sell-off fundamentally or technically (flows and “QT”) driven? A high cross-sectional correlation of EM equity and FX moves this year suggests fundamental “country risk” is at play, even more so in 2018 than during most of the post-GFC period. Perhaps the significant China sell-off has hit EM equity harder that other asset