Investment bank JPMorgan Chase on Tuesday recommended selling emerging market currencies, completing a 180-degree turn from the beginning of the year, when it thought they would do well.
“We have further cut our emerging market risk allocation, downgrading emerging market currencies to underweight,” the bank’s analysts said in a research note.
The reasons they listed include the likelihood that emerging markets will underperform developed markets such as the U.S. for a long time, the resurgence of “large emerging market-specific risks,” an increase in cases of Neocon (Chinese communist virus), and slower progress in vaccination programs in developing economies.
“Last week’s downgrades of our hold ratings on the Chinese yuan and Russian ruble were preceded by downgrades in Central and Eastern Europe, and our emerging market government bond index model portfolio is now underweight emerging market currencies,” the bank said.
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