Investment

Chart of the Month – Emerging Makets FX Feels Woes From Trade

by Hicham Hammoud

Emerging Markets FX Feels Woes From Trade

Source: CPB Netherlands Bureau for Economic Policy Analysis; Goldman Sachs; JP Morgan; Notz Stucki

The FED and the ECB have both recently turned more dovish, US 10Y yield is lower compared to the beginning of the year and is also well off its 2018 peak, China is expected to stabilise growth thanks to recently announced fiscal and monetary stimulus measures and credit spread have compressed aggressively year to date. Market expects that current trade negotiations between the US and China could at least deliver a short-term truce and potentially less tariffs.

All these factors should have been very supportive to Emerging Market (EM) currencies. So why are they lagging other asset classes in 2019 so far?

One of the reasons that could explain this underperformance is the fact that EM central banks have themselves turned dovish after the FED announced the end of Quantitative tightening. Central Banks of Brazil, Mexico, Indonesia, India, Chile, etc… have all either turned dovish or reduced their tightening bias. The only exception is central bank of Turkey which is maintaining discipline to regain credibility but even there it hasn’t paid off as the Turkish Lira performance is negative year to date.

Others possible reasons are not encouraging. As we see in our chart of the month above, there is a long-term correlation between global trade growth and the performance of EM currencies. It could be that EM currencies are telling us that we are in a persistent trend of lower trade or lower trade growth and a short-term deal between the US and China would not be a long-term game changer. EM needs a proper and long-term resolution of trade dispute which clear the outlook for global trade to resume growth.

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Antonio Mira
CHIEF FINANCIAL OFFICER, MEMBER OF THE EXECUTIVE COMMITTEE

Antonio Mira joined NS Partners in 2006 as Group Chief Financial Officer. He heads the corporate functions and is involved in coordinating and implementing the decisions of the Executive Committee.
An experienced bank auditor, Antonio started his career in 1995 with Arthur Andersen, where he worked for some 7 years before joining Ernst & Young in 2002 as a Senior Manager.
Antonio is a Swiss chartered accountant and a Business graduate of Lausanne University (HEC).

Sébastien Poiret
DEPUTY HEAD OF WEALTH MANAGEMENT

Sébastien Poiret joined NS Partners in 2008 and manages funds of hedge funds and private client mandates. He also oversees the development of the Group’s offices in Mauritius.

Prior to joining NS Partners, he served as a Trader, Head of Manager research and Portfolio Manager in the USA and Switzerland for a single hedge fund (1998-2004) and for Optimal (2004-2008), Grupo Santander’s fund-of-hedge funds operations.

Sébastien holds a Bachelor’s degree in Corporate Finance from the ESPEME Business School (EDHEC Group) and an MBA in Finance and Economics from the Institute of Business Administration, both in Nice.

Abir Oreibi
BOARD DIRECTOR

Abir Oreibi joined the Board of the NS Partners Group in 2018, where she brings her truly international perspective and rich experience.
Among many other ventures, Abir set up Alibaba.com’s first European office. After living and working in Shanghai, Hong Kong, Bangkok and London, she now lives in Geneva, where she is CEO of Lift Events, an organization that identifies technology trends, their business and social impact through the organization of events and open innovation programs. Issues related to the challenges and opportunities created by new technologies as well as the strategic responses from organizations are at the heart of Lift’s activities.
Abir holds a BA in Political Sciences from the University of Geneva. She is an investor, and member of advisory and innovation boards.

Romain Pidoux, CAIA

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Romain Pidoux joined NS Partners in 2011 and heads the Group’s Risk Management.
He started his financial career in 2005 as Head of Quantitative Analysis for a Swiss Family Office, selecting funds and managing portfolio allocation. In 2008, he switched to the alternative world and joined Peak Partners as hedge funds analyst.
He is a Chartered Alternative Investment Analyst (CAIA) and holds a Master’s degree in international relations from the Graduate Institute of International Studies at Geneva University.

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