Which Emerging Market Asset Class Performs Best in 2021?

The video discusses key assumptions for emerging markets in the upcoming year, focusing on fiscal and monetary impacts from the pandemic, reduced monetary stimulus, and rate normalization in developed markets. It provides fair value projections for EM credit, rates, and currencies, highlighting potential returns and risks. The influence of the Chinese yuan on EM currencies is also analyzed, with a focus on currency correlations and market expectations.

What is one of the primary assumptions for emerging markets in the upcoming year?

• Increase in monetary stimulus

• Decrease in government debt

• Reduction in private credit

• Fiscal and monetary scars from the pandemic

What could a sharp rise in US Treasurys lead to in emerging markets?

• Higher government debt

• Stronger EM currencies

• Increased monetary stimulus

• A 2013-like taper tantrum

What is expected to make up the difference in EM dollar credit returns if US Treasury yields rise?

• Spread compression

• Currency appreciation

• Increased coupon income

• Higher government debt

What is the expected return range for EM local rates?

• 2.5% to 3.5%

• 5% to 6%

• 4% to 5%

• 1% to 2%

What is the correlation between EM dollar credit and US high yield credit?

• Weak correlation

• Strong correlation

• Inverse correlation

• No correlation

What is a major factor driving EM currency spot movement?

• US inflation rates

• Dollar-Yuan exchange rate

• European interest rates

• Japanese bond yields

What is the outlook for the Chinese yuan according to the transcript?

• Expected to strengthen beyond 700

• Expected to remain stable

• Expected to weaken significantly

• Expected to test 620