More pain looms for EMs as lousy quarter sputters toward end

SAO PAOLO/NEW YORK(June 29): A dark quarter for emerging-market bulls is nearing an end, and it’s not clear whether things will get much brighter down the road, especially in the near-term.

Currencies, stocks and bonds in developing nations are closing out their worst quarter since 2015 and facing a looming trade war, tightening US monetary policy, elections in Latin America and a weaker global growth outlook. Valuations may look appealing, but this thicket of risks has some investors cautious about plunging back in.

The consensus is that, whether emerging markets are set for a rebound or a deeper sell-off, in the short term the asset class is at the mercy of trade headlines. Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. have warned in recent days that more pain lies ahead thanks to the tit-for-tat tariffs between the US and China. And even those on the bullish side, like UBS Global Wealth Management -- which forecasts a double-digit rally in stocks -- are waiting for trade rancor to die down before fully jumping in.

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