Emerging markets: Why investors need to err on the side of caution

Falling commodities weaken sentiment

Emerging markets endured a tough 2015 as weakening growth rates, falling commodity prices, and sensitivity to investors' expectations about the US rate tightening cycle resulted in significant capital flight, writes Abi Oladimeji, CIO at Thomas Miller Investment.

In recent months, however, EM equities have staged a notable recovery, outpacing their developed market counterparts as risk assets rallied between mid-February and the end of April. The question on many investors' minds is whether we have now seen the trough in EM assets. Our view is that investors should err on the side of caution.  It is worth noting while the EM led the aforementioned rally, the recovery in risk appetite in mid-February was broad-based. Essentially, a combination of more upbeat economic reports and the announcement of new stimulus measures by major central banks h...