Emerging markets set to outperform all in 2021: Goldman

Bloomberg

It may come down to another pharmaceutical breakthrough to set the tone for emerging markets headed towards 2021.
Developing-nation stocks, currencies and bonds rose for a third week in the five days through Friday, and Asian markets opened strongly on Monday, as the prospect of a coronavirus vaccine roll-out in the months ahead outweighed concern that rising infections would lead to tougher curbs in the nearer term. Underscoring investor optimism, a measure of implied volatility for currencies fell to the lowest in almost four months.
Emerging markets are set to outperform the rest of the world as a global economic rebound takes hold starting in the second quarter, according to Goldman Sachs Group With reduced political uncertainty following the US election and the potential for more positive vaccine updates, analysts and investors from BlackRock Inc to JPMorgan Chase & Co and Morgan Stanley have been flagging opportunities in risky assets that have trailed peers.
Investors should “move into pro-cyclical positions heading into year-end instead of waiting for economic data to turn more meaningfully,” Goldman analysts, including Andrew Tilton and Kamakshya Trivedi, wrote in a report. The market is likely to “defer difficult questions around vaccine production and distribution for later.”
Findings from the final stage of AstraZeneca Plc’s vaccine studies are due to be released shortly, following the trial successes from Pfizer Inc and Moderna Inc. The stakes for lower- and middle-income nations are immense as the Astra vaccine costs a fraction of the price set by Pfizer and will be manufactured in multiple countries, from India to Brazil.
Staring down more than $17 trillion of negative-yielding debt worldwide, investors will continue to be drawn to the higher returns offered by emerging-market assets as global central banks show little willingness to scale back their unprecedented economic-support policies.
Still, the prospect of an economic recovery in the developing world may have been factored into prices, and investors are concerned about the sharp increase in average fiscal balances and debt burdens this year, said Paul Greer, a money manager in London at Fidelity International. South Africa fell deeper into junk territory after Moody’s Investors Service and Fitch Ratings
lowered the country’s credit ratings as the pandemic pummeled the government’s finances and pushed the economy into its longest recession in almost three decades.
“EM debt still offers attractive risk premium for bond investors that cannot be ignored in an increasingly income-hungry, low inflation and low interest-rate world,” Greer said.