We unveiled a new EM positioning database late last year. Here we provide a further breakdown into equities and bonds, which allow us to zero in on the biggest EM positioning overhangs. The largest overhang, South Africa, is due to both in equal measure.

Oversupply and weak demand have weighed on real estate prices since 2014. Vulnerability stems from an unrealistic economic model amplified by adverse external factors, with detrimental effects to growth and financial stability. However, policy responses may slow the pace of future price declines.

Current account deficits in Frontier LatAm remain wide and are largely dependent on remittances and oil prices. While high FDI helps cover external financing needs, debt buildups have been significant in some countries, increasing external vulnerability amid limited buffers.

Colombia’s current account deficit was wide in 2018, despite depreciation since the oil price shock of 2014-15. We think deficits are largely driven by structural forces.Colombia’s external vulnerability will likely remain.

EM Growth Tracker at 3.6% 3m/3m sa ar in April. Hard data variables behind the improvement. EM Europe & Africa trackers with important gains.

Steady Fed gives sense of balanced risks: “healthy” U.S. economic trajectory, potential inflation rise towards 2%; Frontier market debt growing quickly — total outstanding $3.2 trillion — sovereign defaults low (for now); Green and sustainability-linked lending nearly doubles in 2018 – now almost $100 billion outstanding; LIBOR transition fraught with risks — linked to contract maturity profiles, spreads to new benchmarks

Markets spent 2018 debating if Turkey and Argentina are idiosyncratic, and the same debate is playing out now given the recent market sell-off. Our daily tracking of real money flows highlights broad-based weakness, where we see the EM positioning overhang as one underlying theme.