A recent surge in Covid cases plaguing India and Brazil has put pressure on these emerging economies and their markets.
In an interview on CNBC’s “Trading Nation,” Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management, focused on the global economic recovery.
“It may be a little blip on the radar for these emerging market countries, but it is such a global economy right now. We’re recommending our clients own between 3 and 5% of emerging markets,” Bapis said Thursday.
With technological innovation on the rise as a result of the pandemic and accommodative monetary policies supporting emerging economies, he said, it would be wise to stay invested in their markets.
“It may be a bit early to dabble, but we would buy the space on weakness and have at least a portion of the allocation of client’s portfolios in EM,” Bapis said.
In the same interview, JC O’Hara, chief market technician at MKM Partners, was less optimistic. He focused on the correlation between emerging market currencies and stocks.
“It’s extremely difficult, if not impossible, for emerging economies to advance if they have a depreciating currency,” O’Hara said, pointing to how emerging market stocks are flat while the underlying currencies are actually down several percentage points year to date.
“We refrain to take any large position in EM economies with a depreciating currency,” he said. “We’re sitting out this trade and we’ll wait for the FX market to start to strengthen before we start adding long positions.”
