In China, monetary easing continues. In contrast to the recent shift toward talk of easier monetary policies among the G3 central bankers, China’s economy is alone among the world’s major economies currently in actually benefiting from a relaxation of monetary policy.
Indicators such as the credit impulse are recovering (see exhibit 1 below).
Sino-US trade tensions remain a concern for investors, but unless there’s a sudden deterioration, the stars may slowly be aligning favourably again for emerging-market assets.
In 2015/2016, Chinese monetary easing had powerful implications for emerging-market assets, albeit with a lag. Easier monetary policy was also as an important driver for macroeconomic developments across developed markets then.
While efforts to ease the monetary stance by China’s policymakers are currently more modest and targeting specific areas, we are monitoring their policies closely as a possible game changer.
Exhibit 1: Credit impulse data signals that China is once again easing monetary policy
Source: Bloomberg, BNPP AM; as of 28/06/2019
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The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher than average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity, or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.