Almost everybody loves Russia and wants to get as far away as possible from Turkey.
That just about sums up investor sentiment toward the developing economies of Europe, the Middle East and Africa. Money managers’ top calls for next year are centered on markets where the political climate is improving and assets are less vulnerable to external shocks arising from higher U.S. borrowing costs and President-elect Donald Trump’s policy announcements.
Within politically stable markets, investors are looking for cheaper valuations and an ability to pace a rally in commodity prices.
UBS Group AG says Russia’s ruble will offer the best-carry trade opportunity in EMEA over the next 12 months, with a potential return of 26 percent. Relatively high interest rates and recovering oil prices will drive the currency’s appreciation, the Zurich-based investment bank says.
JPMorgan Chase & Co. expects the Czech koruna to be resilient to global risk and outperform its peers due to support from a strong balance of payments.
Morgan Stanley bets on a rebound in eastern European currencies, especially Poland’s zloty, if political risks in Europe don’t deepen. Most people warned against buying Turkish assets. James Lord, a market strategist at Morgan Stanley, is sticking to his bearish view of the lira, even though it appears to be cheap. He says the lack of focus on productivity growth as wages rise will continue to undermine the currency’s competitiveness.