INVESTOR sentiment towards emerging markets has improved and capital inflows to asset markets have also resumed recently. This appears to have been driven by the increasing recognition that the macro outlook for emerging markets (EM) is improving.
Indeed, our expectations are that EMs ex-China (EMXC), particularly commodity exporters, will transition from adjustment towards a gradual recovery in 2017, driving acceleration in EM growth for the first time in four years.
The business cycle in EMs has typically evolved in the following stages. First, EMs will experience a period of productive growth, in which productivity is strong and macro stability indicators remain in check. The misallocation phase...
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