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According to analysts at TD Securities, there have been strong portfolio inflows into EM assets year to date, and TD’s portfolio outflow risk model currently suggests little risk of outflows, despite still challenging EM macro fundamentals.

Key Quotes

“Economic risks could weigh on inflows, but without further unforeseen shocks, the fundamental picture may well likely be closer to stabilization than a new leg lower.”

“We no longer find that EM equities are cheap relative to DM although valuations differentials are wide within EM. EMEA equities are the cheapest. Asia could struggle to attract strong inflows given relatively high valuations.”

“EMEA has the most scope for increased positioning while investors have become more cautious on Asia bonds. In Latam the scope for increased positioning appears very limited.”

“Based on our forecasts for key market variables we find that EM FX in aggregate should give modest, positive spot returns for the USD-based investor by end-2019.”