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“We take another step down in our EM risk allocation, moving EM FX to UW (underweight)” the bank’s analysts said in a research note.
They cited the likelihood of an extended period of EM growth underperformance versus developed markets like the United States, renewed “idiosyncratic risks in large EMs” as well as rising COVID cases and slower vaccination programmes in developing economies.
“Having cut CNY (Chinese yuan) and RUB (Russian rouble) overweights last week, and CEE exposure before that, our GBI-EM Model Portfolio is now underweight EM FX,” the bank said.
