Emerging markets shares and currencies plummeted on Friday. The sell-off comes after the surprise election of Donald trump.
Risk aversion to bonds is clear in the market. Analysts believe that Trump will conjure up a lot of stimulus in the market which will ignite rates in Treasuries and bunds. As a result of Trump’s presidential victory, a surge in capital outflow will commence in emerging markets. Additionally, rising US yields will cause emerging market’s capital outflows to become increasingly uncertain. This caused a bearish trend in emerging-market equities and currencies
The MSCI Emerging Markets Index fell 5.3% since Trump was elected. The HSI was down 1.4% on Friday According to analysts, the emerging market is highly undervalued right now. Analysts are therefore, urging investors to resist from joining in on the brash sell-off.
Previously, investment in emerging markets was expected to be around $157 billion. After the election of Trump however, investors have retrieved from emerging markets on the premise of increased spending on U.S. infrastructure and tax cuts. As investors piece together what the market will look like under Trump rule, it will be increasingly difficult to decipher future trends.