MANAMA: Emerging market assets will make a good investment in 2017 considering they hold superior earnings projections, low valuations and the potential for mean reversion after years of underperformance, according to Mihir Kapadia, CEO and Founder of Sun Global Investments.
“Further to the minutes of meeting from the federal reserve in December, the US dollar has fallen the most in a month as the Fed noted concerns about the impact of a strong currency on the new US administration’s stimulatory economic policies. The dollar has appreciated quite strongly since the election of Donald Trump and therefore a little bit of profit taking followed by a pause should not be surprising,” regarding the performance of the dollar ahead of the minutes of the meeting from the Federal Reserve, he said.
“The key thing is the nature of the debate has changed. For many years after the great crash, the Fed has been cautious about rising rates and has preferred to wait for more data before acting and has been reluctant to raise rates from record low rates. In fact, there have been only two 0.25% Fed Fund rate increases in the last eight years. This is now changing and terms of the debate going forward will be different. The resilience of the US economy, particularly the employment numbers, and the election of Donald Trump and the market reaction to his victory have changed the narrative. The Fed is taking account of the likely fiscal expansion under the new administration and is more focused on the inflationary risks of growth than has been the case for many years. The Fed has targeted gradual increases in interest rates in the next one or two years to address this risk.”
The US dollar has fallen the most in a month while emerging market equities rallied backed by strong performances across the Asian region including Hong Kong and India. Over the past few weeks, the emerging market currencies have taken a significant hit in part due to investor fears about statements from Trump, especially on economic and political policy proposals for China and Mexico.
