Emerging Market stocks & currencies have their best month since January

Still, the MSCI EM index remains down 14 per cent for the year while the JPMorgan EM currency index is nursing a 10 per cent decline.

So it is likely then that trade, Trump and treasuries will be the major factors affecting emerging markets over the next three to nine months. With Politics continuing to challenge and have a dampening effect on investor sentiment towards emerging markets more generally.

Investors regained a penchant for riskier assets in November, with emerging market stocks and currencies likely to post their best month since January amid hopes the US and China would call an armistice on their trade dispute and cut the risks to global growth.

The MSCI Emerging Market stock index is poised to end the month 4.1 percent higher despite slipping on Friday. Likewise, the benchmark JPMorgan emerging markets currency index is on course for a 1.6 percent monthly advance.

EM assets have had a rocky run since the start of the year as rising US interest rates and a resurgent dollar sapped demand. President Donald Trump’s trade war against China, which has undermined the forecast for the global economy, has further fuelled fears of weaker demand for the commodities that form up the foundation for many developing countries.

Meanwhile, country-specific issues in Turkey, Argentina, South Africa and Russia have added to the apprehension, with a sharp currency sell-offs in those countries over the summer prompting some investors to question whether a more severe pullback could be in store.

But there has been a slight rebound in sentiment this month ahead of a climactic meeting on the sidelines of the G20 summit between the US and China that could help crack the impasse on trade.

Assets also got a boost after Federal Reserve chair Jay Powell said this week he believed US interest rates were “just below” neutral, a level considered by economists as neither stimulating nor hindering economic growth.

The remarks, which were seen by markets as dovish, have heightened expectations that the US central bank may moderate the pace of interest-rate hikes next year and, by extension, the progress of the dollar.