Why are EM folks 10 miles wide, but 1 inch deep?
So I often read EM traders/investors expressing opinions on Brazil, next China, then Mongolia, then Uganda in the span of 10 mins.
Why do they act like they know about every EM (even frontier) and that every country is alike to one another? How are they able to trade country A then country B without "focus"?
My understanding of EM:
Equities: mostly relationships and seeing how legit the management is
Macro Products: commodities/trade while watching out for central banks/capital controls
Hi crabcurry, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
Who will rescue this thread? richkammearth clarahelen89 @Fuwuyuan"
Hope that helps.
I'll take a shot.
For #1 it's because they generally have teams that focus on regions/countries/industries etc and these folks are tasked with covering say 15-20 countries closely so a standard team of 3 analysts could cover ~45-60 countries. The PM doesn't know all the nitty gritty but should know the key themes; also he or she likely still follows some of the countries themselves or focused on them in a previous role.
For #2 they are not all the same but many of them are pretty similar- i.e. oil exporters, small open economies, offshore financial centers, asian tigers etc. More importantly you generally need a core framework to analyze countries and this should be standardized to enable you to do relative value (of course you need to augment it with country specific stuff).
On #3 if you're asking how someone would trade onshore Brazilian fixed income, Malaysian equities, and sub-saharan African hard currency debt...well the answer is not too many people have that mandate. On the other hand trading Brazilian/Malaysian/sub saharan African hard currency debt is perfectly reasonable as they theoretically could all be in ones investable universe for a hard currency debt manager (hopefully makes sense)
Bingo, great answer
Ian Bremmer offers a pretty good definition of EMs as markets where "politics matter as much as economics." In other words, EMs are much more driven by geopolitical and macro factors -- that is not to say that a bottoms-up approach is not viable; just that it may be much more difficult to execute in an environment where the macro dominates -- and thus more emphasis is placed on key themes, as mentioned above.
Bremmer’s shop is very good at political risk analysis...and poor at translating it into actionable investment ideas (not their main focus I know but they try to dabble in it).
agreed. Vagabond, can you take a look at the NYC EM trading thread I posted?
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