Emerging markets have had a difficult start to 2016. Data showed that composite PMI for Emerging markets dipped to 49.5 in December. The IMF also revised its 2016 EM growth forecast to 4.3% earlier in Jan, and further GDP downward revisions during 2016 cannot be ruled out.
Asia and Latam would be the most vulnerable to Chinese economic slowdown and the commodities rout, considering their high proportion of their exports to China. The economic situation remains sluggish and Fed tightening, currency depreciation, and falling commodities prices are likely to pose further headwinds.
"Given macro headwinds, we expect a persistently challenging environment for EM in H2 2016, but further spill-over into developed markets should be contained," said Societe Generale in a note to clients.
