- Valuations are attractive on an absolute and relative basis.
- Cross-asset breadth for EM assets (stocks/bonds/FX) making a sharp move higher from washed-out levels.
- EM central banks are collectively pivoting from rate hikes to cuts, which supports EM assets.
- China is moving towards a larger stimulus as the property downturn deepens and the economy slows further.
- Technically, the chart shows a bullish RSI divergence and a double bottom 'h' pattern occurring near the apex of a massive 10-year symmetrical triangle.
- Extreme and lingering pessimism marks a reset in sentiment and a contrarian signal.
- Market consensus: The Fed is done with rate hikes and the USD has peaked.
- Note: Despite cheap valuations, clear downside risks are intensifying as stimulus-hesitance and bad karma continue.
In summary, given the macro catalysts, valuation story, sentiment reset, and promising technicals, an inflection point is appearing. While I refuse to invest in China for personal reasons, it would be wrong to ignore the upside and indeed what is different this time.