Time to Stockpile Cash


By Tanya Rawat

While the Dubai and Saudi stock exchanges have been reaping gains from the rebounding oil prices, it’s time to start building up cash reserves into GCC portfolios.

There are three vital signs of imminent correction and why the timing is perfect for this approach. Since the start of the year both the DFM (the Dubai exchange) and Tadawul (the Saudi Index) have been stuck in a pretty tight price range (meaning that the markets have been moving sideways without meaningful direction) — the former at 3,380 wavering at +/-5.50% and the latter more tightly squeezed around the 7,000 level at around +/-3.50% on a weekly basis.

Secondly, the S&P 500, a leading US equity market index that dictates the direction of markets around the world, has been unable to sustain the rally after breaching the 2,400 price level since the start of the year and always falls back below that key level. As it nears this level again, it is unnerving as this time it’s laden with the fact that two of its largest constituents; infotech (tech firms like Apple and Google), and financials (banks like  Goldman Sachs, Wells Fargo and others) are poised to reach critical overbought levels. The infotech tech is shy off 3-4% off price the highs it saw in the year 2000 while financials have been trying to breach the 400 price level to sustain a stronger rally, however always fall below this level. Additionally, the weekly price data change shows sectoral rotation (change in portfolio allocation across sectors) in the S&P 500 into defensive names, such as consumer names, utilities and healthcare and out of cyclicals akin to infotech and financials.

Finally, for a month now, the benchmark US 10-year treasury yields appeared stuck below and around a pivot point of 2.30 yield level, which means declining consumer inflation expectations. Going forward, it is likely to decline further due to the falling yield spread between 10-year U.S. Treasuries and similar-maturity Treasury Inflation Protected Securities (TIPS), which measure investors’ expectations for average annual consumer-price gains over the next decade. They have also been retreating. Moreover, the Core PCE print, which is a key inflation measure employed by the Federal Reserve, has been coming in below the 2% print since February this year; a magic threshold set by the Central Banks around the world. This signals a strong case for keeping the rate hike on hold in June, which implies further headwinds for the GCC as it will likely stifle the rally in the US stock markets.

The fragility of the US financial markets are finally converging to what the economic data has been pointing to over the past two quarters of weak data like declining consumer spending and muted industrial production in the U.S. Durable goods orders which constitute 15% of the largest contributor to GDP (consumption) have also been painting a troubling picture with the recent rise in auto sector loan delinquencies across US.

So despite the positive beta rewards the GCC stock market has been reaping from oil price strength, there are still plenty of clouds to watch in the global financial space. CFTC (Commodity Futures Trading Commission) data shows robust ongoing consolidation move into haven assets like gold reflecting increasing risk-off sentiment or risk averseness. Time to deploy those cash reserves.

Questions? Comments? Contact me at Tanya@rawatspeaks.com.

Copyright © 2017 Tanya Rawat. All rights reserved. These materials are proprietary to Tanya Rawat and may not be reproduced, modified, transmitted, transferred or distributed in any form without the prior written consent of the author Tanya Rawat.

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Ides of March

GRI2

Author: Tanya Rawat

On 15th March 2017, Janet Yellen, Federal Reserve (Fed) Chair, announced a quarter percent age rate hike in the Federal Funds rate (nominal rate); the third hike since 2008 financial crisis. While a widely-expected move (as shown by a near 98% probability indicated by the Federal Funds futures contracts traded on the Chicago Board of Trade), I reason it’s premature as inflation isn’t exactly as high nor is there sufficient strength in the labour markets as beckoned by the rate hike.

So what is a Federal Funds rate? And why is it so important? This is a short-term interest rate targeted by the Federal Reserve’s Federal Open Market Committee (FOMC) as part of its monetary policy i.e. to manage money supply in the economy. This rate is important as it forms the basis of the rate used by banks to lend reserve balances to other depository institutions overnight, on an uncollateralized basis. Raising the federal funds rate will dissuade banks from taking out such inter-bank loans, which in turn will make cash that much harder to procure and thus leaving the banks lesser amounts to extend to their customers. This reduces the money circulating in the economy, thus reducing inflation. Inflation is the rate at which the general level of prices for goods and services are rising. While inflation is a harbinger of an economy returning to normal levels of activity and is in fact a regulator along with deflation (fall in prices of goods and services), it carries negative connotations. This is primarily because it reduces the purchasing power of existing currency. For example, if $1 can buy who a chocolate bar, a rise in inflation would be mean the same bar probably costs $2 now. Thus, $1 can no longer buy you the chocolate bar, thereby reducing your purchasing power. In similar vein, if you are earning 2% (nominal interest rate) on your savings account or your equity portfolio, an increase in inflation to 3% would imply you will be earning -1% (real interest rate = nominal interest rate – expected inflation rate) or a negative yield, thus not earning anything ! This will force you to seek alternative sources of investment with a positive yield.

Rewinding the clock to the first rate hike in December 2015, the Fed announced the probability of four rate hikes in the following year 2016. On these rather bullish claims, the primary haven security viz. Gold first rallied up circa 30% before midway through 2016 it erased its gain by circa 17% (peak-to-trough). The rhetoric was carried forward to the December 2016 FOMC meeting when Janet Yellen, talked about three rate hikes to be expected in 2017. This I believed at that time was excessive optimism, given that, only 1 out of 4 rate hikes proposed in the December 2015 materialized in 2016 i.e. a 25% probability of a hike.

Armed with this data point, I inferred that the Fed was expecting high momentum in inflation in 2017 as well, akin to what they envisaged in the previous year i.e. negative real interest rates. This was an ideal scenario for haven securities such as Gold or US Treasuries as asset classes, since the Fed would only raise rates at such high regularity if the real rates turn negative i.e. making them more attractive as the classic inflation hedge along the way. It does the Fed no good to raise rates unless inflation is going up even faster or at least expected to.    The Fed’s measure of inflation isn’t the CPI number, but rather the PCE. (Foot Note 1) Take a glance at the recent PCE release which is indicative of rising inflation expectations, but these March numbers are from a survey for the month of February. Since then, crude oil prices have shaved off ~10%. This weakens any case of rising inflation as input costs will only fall in the coming months. Only in April will we see the markets ‘waking up’ to actual inflation, barring a scenario wherein crude oil goes back up to $55/barrel range. Furthermore, actual production numbers (capacity utilization and industrial production) and retail sales are moving sideways, implying sluggish manufacturing and consumer activity while there is unexplained ‘exuberance’ in sentiment indicators with non-manufacturing and manufacturing PMI and consumer sentiments gauges pointing North.

In the labour market, labour force participation rate is still below 2008 levels while the U-6 measure of unemployment rate (includes involuntarily unemployed and unable to secure jobs and those involuntarily stuck in par-time jobs but want full-time jobs) remains well above pre-2008 levels.

Capture                                                                                                                           (Source: Bloomberg)

This disconnect in actual numbers (fact) versus sentiment indicators (fiction) is unfortunately being overlooked due to the continued uptrend of the financial markets. Breaking down the S&P 500 Stock Index (SPX), we will look at how cyclical sectors are performing versus defensive names. Cyclical sectors as the name suggests do well when there are expectations are of an improving economic outlook and inversely for defensive sectors.

Here too, the sector indicators concur what the sentiment indicators (viz. PMI, Consumer Sentiment Surveys et cetera) are implying and that is the fact that cyclical sectors are gaining momentum while defensive ones are weakening; Information Technology (IT) outperforming the index, Consumer Discretionary has joined the momentum, while momentum in Utilities, HealthCare and Consumer Staples is plateauing. (4-week change in relative strength ratio momentum). Carrying the highest weight in the SPX (~21%), IT is most likely to extend the SPX to higher levels as a weakening Dollar is likely to benefit companies with majority of returns from outside the US Geography. 33% of SPX Index and NASDAQ Composite companies derive their profits from outside US markets with IT being the largest (Data Source: Bloomberg). Style indicators corroborate our findings that only Large Cap (LC) growth companies as improving tremendously whilst value companies are close to lagging the index.    In summary, financial markets merely reflect sentiment which is more times than less rather detached from reality and more so now. Latest economic data from February showed the gap between fact and fiction is widening; with Existing home sales falling showing home buyers are watchful of rising mortgage rates while Core Durable goods orders (goods that do not need to be purchased frequently because they are made to last for a long time viz. three years or more) and is a leading indicator for the health of the US economy, remained stagnant implying consumer sentiment in the medium term hasn’t improved. Because capital goods take longer on average to manufacture than cyclical goods, new orders are often used to gauge the likelihood of sales and earnings increases by the companies who make them.

Worryingly, only one member of the ten member FOMC dissented to a rate hike. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis raised the all-important question which hasn’t been remotely talked about in any of the FOMC meetings yet: When will the Fed start to reduce the size of its Balance Sheet which will be akin to a rate hike in its self. Maybe it’s time we start to take a look.

Footnote 1: The Consumer Price Index (CPI) is released by the Bureau of Labor Statistics and the Personal Consumption Expenditures price index (PCE) issued by the Bureau of Economic Analysis. The CPI and PCE have two measures: headline measure and a core measure, which removes the volatile food and energy components. Over the short term, the core measure is more likely to give an accurate reading of the inflation trajectory. While the CPI is based on a survey of what households are buying; the PCE is based on surveys of what businesses are selling. The CPI only covers out-of-pocket expenditures on goods and services purchased and excludes other expenditures that are not paid for directly; for example, employer-provided insurance which PCE accounts for.

Copyright © 2017 Tanya Rawat. All rights reserved. These materials are proprietary to Tanya Rawat and may not be reproduced, modified, transmitted, transferred or distributed in any form without the prior written consent of the author Tanya Rawat.

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Back to Basics: To Gold or not to Gold?

Author: Tanya Rawat 

When the Federal Reserve announced the probability of 4 rate hikes in 2016 at the Dec 2015 FOMC meeting, Gold first rallied up circa 30%  before midway erasing its gain by ~17% (peak-to-trough).  The rhetoric I feel is similar this year.

There however is a bit of a disconnect in the markets. The possibility of 3 hikes happening in 2017 is a bit rich as it was in 2016 with only ¼ materializing i.e. a 25% probability of a hike. That just implies, the Fed is seeing high momentum in inflation as  they envisaged in Dec 2015 i.e. negative real rates (nominal rates less inflation).

That is perfect for Gold bugs as the Fed will only raise rates at such high frequency if the real rates  turn negative i.e. making Gold more attractive as the classic inflation hedge along the way.

It does the Fed no good to raise rates unless inflation is going up even faster.

Once Trump comes to power and clarifies his stance, Gold buys will look more attractive. Just my 2 gms worth of thoughts. P.S. Net speculative positioning in Gold is has reached oversold levels.

© 2012-2017 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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Shale Oil, Interest Rates and Known Unknowns

Author: Petar Kordic

In late 2014, an experienced oilman was discussing booming US oil industry on Bloomberg TV. He was long enough in the game to remember both booms and busts but he pointed out one peculiarity about this new age of crude – Oil & Gas conferences were dominated by bankers. He made a joke on cuff links, a fashion details not so popular with oilmen.

In US, hydraulic fracturing has been around for more than 6 decades, but only in the last 10 years shale oil became unavoidable part of discussion on US oil industry. Today, it’s the most important factor when discussing oil, globally. We will discuss two factors that contributed to the rise of hydraulic fracturing: high price of oil, and vast supply of money due to low interest rates. As graphs below show, a drop in interest rates after 2007 crash, and rise in price of oil in second quarter of 2000’s created a potent mix which allowed oil industry to invest in shale and try something that was thought to be possible technically however very expensive – to bring shale production to a level expressed in millions of barrels per day.

WTI
WTI Price, Source: TradingView

 

u.s.tight_oil_production
US Shale Oil production, Source: EIA

In 2000’s we witnessed growth in price of crude, which was caused by increase in demand for energy, and in later stages by interruptions in Iraqi production primarily. In the year 2007, extreme volatility started to occur and it lasted for two years. Financial crisis and attacks on installations in Iraq caused the price to bounce from one extreme to another. In second half of 2009, price passed the $70 mark and managed to stay above that level for next 5 years, trading between $80 and $110. Such a high price wasn’t unnoticed – not only by consumers at the gas stations, but also by investors and banks.

gr-cb-chart-12-1002
Fed interest rate, Source: GlobalRates

At the same time (2009-2015) interest rate dropped to 0.25. This was Fed’s response to the financial crisis, where it was recognized that markets need liquidity. With all the turbulence in equity markets in 2007 – 2009, expensive crude was able to attract investments easily. According to Bloomberg, in a year 2000 funding from stock and bond sales was at $24.2 billion, while in 2014 funding reached $209 billion. Shale oil production went from 0.4 mmbd to 4.6 mmbd at its peak in early 2015. Eagle Ford in Texas and Bakken formation in North Dakota led the charge.

main
Source: EIA

Today, debt is coming back with a vengeance. More and more of operating cash flow is being consumed by debt servicing. Unlike in the 1980’s when crude price crash caused many banks to go bust in the Midwest, this time lenders are a little bit more cautious and Bloomberg data shows that between today and 2009, equity and debt sale covered approximately 50% of loans and debt restructuring in E&P sector in North America.

December decision by the Fed to increase rates from 0.25 to 0.5, and possiblefurther hike could be a sign of things to come. At this moment it is hard to see anything positive in the shale oil sector, except for increase in efficiency. There are some opinions that whenever the price of crude recovers, shale will follow and bounce back. After all, US currently has 59 billion barrels of oil in shale, second highest reserves in the world. But we must take into consideration scenario where oil prices remain low for some time before recovering, causing large scale bankruptcies and write-offs. Will capital intensive shale oil sector be able to attract capital easily again? Can it operate in the environment where money isn’t cheap due to a mix of higher interest rates and price risk? OPEC and few oil producers outside of OPEC certainty hope that the answer is no.

© 2012-2016 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

To be or not to be

bailout

Author: Kunal Damle

All this week has been about Greece with the ups and downs that started off with Capital Controls being imposed on Greece. It was a tough nut but sadly it came to this after all the brinksmanship that was involved. Equity markets swooned over this Greek Swan Song. On the other hand was China, were the markets were on a roller coaster ride of their own, with equity markets extremely volatile; down over 25% in the last month.  One can only say that volatility with a capital ‘’V’’ will be the name of the game.

Indian equities were resilient and saw decent gains going into the week. I would be a little cautious with earnings still weak and the stock markets euphoric; not exactly a recipe for success. Watch out for blips in the coming week.

Closer home GCC markets have been subdued, with Oil correcting to a 12-week low. Commodities have been hit hard on the back of USD Strength. With earnings season round the corner implies most investors would be on a wait-and-watch mode. UAE Stock market especially DFM has been resilient but most of the activity has been in the mid-cap names; eg: Amlak, Amanat, DSI et cetera. Dubai as a market looks to be in a better shape and earnings could be the trigger for the market. Turkey looks apprehensive as June CPI numbers printed at the lowest since 2013 at 7.2%. The outlook for next week, not mutually exclusively depends on the Greek plebiscite.  South Africa too is taking cues from the happenings in Greece.

Finally today will be when the Greeks decide on whether to Vote a “Yes” or “No”. Whatever happens equity markets are in for a choppy week.

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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Liberté, Égalité, Fraternité (Market Wrap- June 28th)

Coverage: Saudi Arabia, Turkey, UAE, Egypt, Nigeria and South Africa

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Author: Tanya Rawat

The week starts off with euphoria offline as the US Supreme Court in a landmark ruling legalized same-sex marriage nationwide (Source: Bloomberg Article on the ruling). I personally am of the strong opinion that everyone should be free to love anyone they deem fit. By legalizing the same, the ruling ensures that everyone is viewed equally by law in terms of financial and taxation purposes.

Our opening rhetoric is on a high probability of returning to a Greek Dra(ch)ma and a likely escalation in terrorist acts in the region. Markets are likely to slide slower in the Ramadan season with limited volumes, correction in Saudi Arabia as pre-opening euphoria subsides and as terrorist activities creep closer to the GCC region with attacks in Kuwait and Tunisia.

Naira remained stable at 199/$ while the Rand hit one weeks lows versus the dollar at 12.2395/$ as rising consumer inflation deems a rate hike imminent in the next South African Reserve Bank (SARB) meeting in July by 25 bps from 5.75%. This is set to continue hurting the JALSH Index.

US 10Y Tsy yields continues to edge higher at 2.40% levels and I expect Dollar to continue strengthening this week primarily on the back of see-saw Greek talks with ECB.

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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Saudi Arabia: An ‘Emerging’ Frontier

“Think you could get me on ‘Amercan Idol’?”

Author: Tanya Rawat

Published in Global Risk Insights

Saudi Arabia opened its markets to international investors on June 15, 2015. It was the culmination of journey which started in July 2014 when the Saudi Cabinet took the decision to open the markets to Foreign Direct Investment (FDI). While this indeed is a watershed moment in GCC scripts, all eyes are on its 2018 inclusion to the MSCI Emerging Markets Index. Apropos not being included in MSCI’s Consultation List this year, the earliest it would be, is June 2016. In previous upgrades, MSCI has one year of consultation period followed by another year from when the announcement is made before the inclusion.

So, what makes it an ideal candidate for inclusion? While the size of its economy (Nominal GDP) equals that of  Turkey, its appeal comes from its fixed peg to the US Dollar that makes it less susceptible to currency fluctuations. With a market capitalization of half a trillion US Dollars and an average daily trading volume (three month average) amounting to USD 1.5 billion, it dwarfs most Emerging Market (EM) countries. The oil boom enabled it to accumulate the world’s third largest FX reserves at USD 700 bn, just behind China and Japan. Its Public Debt is non-existent at 1.8% of GDP compared to the EM 2015 expected average of 37.4%. Within the GCC universe, it is the lowest. Its young demographic is a favourable economic opportunity; a population of 31 million (2015 expected) with a median age of less than 25 years. Nominal GDP per capita stands at a highly competitive $24,847 and Real GDP expected growth rate in 2015 stands at 3% which is in line with 2.9% for the EM universe.

Yet with all its advantages, some sticky challenges remain. As oil  revenues account for 85%-90% of government revenue at a stable production level of 9.6 million barrels per day, its Achilles heel was exposed as oil prices plunged 59% in the last quarter of 2014. This has repercussions for Saudi Arabia which will face its worst fiscal deficit of circa 15% of GDP (assuming an average oil price of $50 per barrel)(see graph). Also the fairly young work-force of nationals are primarily employed in the public sector and female labour force participation rate remains dismal at 18% versus 65% for men.

scenario

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Addressing these labour market challenges, driving job growth and diversifying its revenue base remain key to the emergence of Saudi Arabia as global competitor economy which is more than an ideal candidate for Emerging Market status.

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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Indian Swansong

cover-image (1)
Author: Nilotpal Addy

“Fragility is the quality of things that are vulnerable to volatility.” – Nassim Nicholas Taleb

Indian markets have been the king of swings in the past few weeks. Pick up any asset class that you may, and you will be enthralled at the volatility this market has provided to its investors. It was not long ago when the Bunds swung from 0.05% to 0.50%, which left many bond traders across the world gasping for breath. Wait till you look at the below data and determine where the Indian markets fared in this royal rumble:

India 10yr Benchmark (Old)old
Source: Bloomberg

India 10yr Benchmark (New)new
Source: Bloomberg

India 1yr OIS
irs1
Source: Bloomberg

India 5yr OIS
irs5
Source: Bloomberg

If you were wondering these were triggered by fears of Grexit and a possible surprise rate hike by the Fed in June, you would be caught on the wrong foot. If you notice the graphs carefully, it is evident that all of these market actions got triggered on 2nd June – the D-day when the Central Bank of India (RBI) under the helm of the able Dr. Raghuram Rajan announced the June Monetary Policy. The market was expecting a 25 bps rate cut on the back of easing inflation in the country. The fact that inflation was moving in line with the guidance set by the RBI under recommendation from the Urijit Patel Committee targeting 6% CPI inflation by January 2016 increased the market mojo. There were players who even expected a 50 bps rate cut with 25 bps being front loaded (just in case the RBI fell short in countering the Feds rate hike move later).

If you ask me, I believed that a rate cut was not in the offing. This was simply because Dr. Rajan has always been skeptic in his moves. More often than not he has disappointed the market punters by staying put (he put a rate cut on hold from September till December 2014 until he decided to give in with a surprise rate cut in January 2015, not so much of a surprise for a few considering he cut immediately after the CPI numbers continued to confirm a declining trend). If we were to look at the state of things when he was handed the mantle from Dr. Subbarao, you can’t really blame him for this approach. The Indian economy was in tatters, the world had started to give up on the Indian markets, and the currency was untamed (to name a few problems he had to deal with).

So much for all the expectations, Dr. Rajan delivered a 25 bps rate cut. But that is not what he just did. Being his usual self, he left the market with no clues for the next elusive rate cut. He had his doubts on the upcoming monsoon, and rightly so after predictions of another weak monsoon. He alarmingly left the market to fend for itself amidst multiple other geopolitical and economic concerns. Meanwhile at the other end of Asia, the Chinese equity markets had almost doubled since the start of the year. Foreign investors found the perfect excuse to take money out of the Indian markets. Rates traders started to shrivel, and the market started its swansong.  Bond/OIS started moving in a haywire fashion until inflation seemed to be taking a strong stand. CPI last month came in at 5.10% which was pretty much as per expectations. This was followed up by a decent trade deficit of $10.40 bn., which gave the markets a much needed booster to crawl up from the bottoms.

Last week Govt. of India along with the RBI decided to mark up the FII bond investment limit in India from USD to INR. The current bond investment cap is at $30 bn which has been set at somewhere around INR 50. Spot is currently trading at levels around 63.50 – 64.00. So this means a possible increased investment limit of $8-9 bn. This has provided a much needed fillip to the bond yields, which has now rallied from 7.88% to current levels of 7.70% – 7.75%. With Greece talks in its last leg and an expected Fed rate hike in September (25 bps hike expected), the upcoming weeks will determine the direction for the markets.

As I am writing this, there is some positive news trickling in for a renewed Greek settlement. I can already see some flutter happening in the markets. Bond and OIS markets have started to book some profits. Markets seem to be calming down now a bit as we brace for some movement in the commodities space. I am looking forward to the next set of data due early next month. Till then look out for this space, as I go fishing for some fresh cues in this appalling Mumbai rains!

© 2012-2015 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

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Markets: Turkey and MSCI EM Spread Analysis

In Turkey, as we postulated last week, we are bullish primarily because valuations are extremely attractive in our coverage universe; 12-month forward valuations show Price-to-Book at 1.33x and Price-to-Earnings at 10.59x.

1 year spread analysis shows us that with respect to MSCI Emerging Markets Index, it is currently 2 standard deviations below the mean before the mean reversion kicked in post elections.

turkey and msci em

Source: Bloomberg

Switcheroo (Market Wrap- June 21st)

Coverage: Saudi Arabia, Turkey, UAE, Egypt, Nigeria and South Africa

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Author: Kunal Damle

A mixed week comes to an end with most of the stock markets at multi-year highs but with mounting concerns coming in from multiple fronts, it doesn’t seem like it is going to get any easy.

With the FOMC out of the way, most emerging markets heaved a sigh of relief that the rate increase rhetoric is more subdued than one expected. We expect one rate rise before the end of this year, but more subdued increases going into 2016. With commodity prices having come off and inflation under control, the risk to USD will weigh on the Fed’s mind than anything else.

Most emerging markets (EM) saw the dovish stance of the Fed as a breather to rally on. Both the Nifty and Sensex in India rallied with even monsoon looking like being normal. In Turkey, as we postulated last week, we are bullish primarily because valuations are extremely attractive in our coverage universe; 12-month forward valuations show Price-to-Book at 1.33x and Price-to-Earnings at 10.59x. South Africa closed up 1.86% on the back of a strengthening Rand.

valuations

Source: Bloomberg

Closer to our region, last week marked the beginning of the Holy Month of Ramadan. Markets have historically tended to be very light on volumes and with Ramadan coming in during the summer months would put even more pressure on the markets. The Saudi Markets opened to foreign investment last week, which as we expected was a very tepid event. Look forward to Saudi markets seeing more profit taking with no triggers in place. We see markets being flat, low on volumes till mid – July.

The coming week look far murkier with Grexit now looking imminent. Emerging markets looking ripe for an downward correction while look to USD strength against most EM FX.

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