According to a research note released today by chief Asia economist Chetan Ahya
The note argues that the key driver for global growth acceleration this year will be emerging markets excluding China, and that emerging market currencies "remain a buy" as one of the key trades highlighted.
The top picks mentioned in the note are the ZAR, BRL, PLN, and RUB.
"The role of EM excluding China in driving the global cycle should not be underestimated", the note says. Pointing out that EM excluding China now accounts for 41% of global GDP, or 24% in USD terms.
However, the note mentions that risks to such a view on economic outlook could come from domestic factors such as idiosyncratic political developments and/or externally from sharp tightening in global financial conditions, rise in inflation and corporate credit risks in the US.
Emerging market currencies have been enjoying a good two years as global assets and equities have been rising in tandem as well, but could face a tough year in 2018 with inflation in developed markets being the biggest risk in my view. It's something that was talked about earlier in the year here as well.
