A top strategist says it’s time to pile into world’s worst currencies

‘It’s the best time to buy emerging markets in over 20 years, Robertson said
Image: Waldo Swiegers / Bloomberg

Emerging-market currencies offer the best buying opportunity in more than two decades, according to Charlie Robertson, Renaissance Capital’s global chief economist.

The London-based strategist said he particularly likes the South African rand, Mexican peso and Brazilian real, which happen to be the three hardest-hit major currencies this year. His bull case is based on historically cheap valuations, funding support from multilateral lenders and the prospect of a weaker US dollar. Meantime, he said crude oil prices could rebound to $45 or $50 per barrel “medium term,” buoying assets such as Russia’s ruble.

“It’s the best time to buy emerging markets in over 20 years,” Robertson, 48, said in an interview on Monday. “This is the cheapest opportunity since the last time everyone hated EM after the Asian crisis and Russian default.”

Robertson, who earned plaudits for a wager on Romanian bonds in the late 1990s as well as a bet on South Africa’s rand in 2016, is among a contingent of contrarians flagging emerging-market bargains, even as some of the world’s biggest money managers warn of more pain to come. MSCI’s developing-nation currency gauge hit a three-year low last month, and Robertson’s top picks in South Africa, Mexico and Brazil are testing their weakest levels ever.

Those sell-offs may soon reverse as Renaissance Capital expects the International Monetary Fund and World Bank to backstop many developing nations, while US President Donald Trump pushes for a cheaper dollar.

“These are remarkable valuation levels,” Robertson said.

© 2020 Bloomberg

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This guy has a point. The Fed is hell-bent on winning the currency war. They want a weaker dollar and the Fed gets what the Fed wants. Emerging Markets outperform the World Index during periods of dollar weakness. This is a very unpopular call, but it looks like it is time to switch to Emerging Markets if we can put our money on the Fed’s resolve to weaken the dollar. Sorry, Mr Heystack. I am looking for the needle.

…but Sensei …would agree there are EM’s and then there are the real EM’s? Particularly Mexico, Columbia, Indonesia, Vietnam and the Philippines?

Yes Leah, and you can buy all those opportunities from your offshore account. The ANC’s Kampaign Against Kapital(KAK) stinks to high heaven and pushes capital offshore.

Not even the FED can beat the ANC in efforts to devalue the rand.
We might see short term blips of strength but longer term there is just no way the Rand can strengthen. even with Dollar weakening we will weaken even more.
We are on the precipice and the Covid-19 might just be the final nail.
Our ANC government is still hellbent on supporting only a part of the economy and consciously pushing the other part down … Just look at what they are doing with the aid packages anounced.

If you run regression tests on the rand since 1970’s, the two best determinants of rand strength are 1. precious metals prices 2. S&P 500.

In a country choked up with inherent risk, recession, money printing, tax shortfalls and exploding debt/GDP ratios, South Africans should be praying those two to go up. Otherwise, it’s the perfect bear market recipe for the rand.

End of comments.

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