Key components of EM cycle turning more favourable, Credit Suisse says

Greater stability in global capital markets led Credit Suisse to add to its allocation to emerging market assets from those countries considered to be more 'value' stories instead of 'growth'.

Several key components of the cycle for EMs drove the top-rated broker to add to its positions in assets from Turkey, South Korea, China and Brazil.

Analaysts Alexander Redman and Arun Sai referenced the "consolidation" in the trade-weighted US dollar, stronger EM currencies, a modest rebound in commodity prices, a rebuild in EM non-financial profit margins and a reacceleration in net portfolio flows into EM funds among the main reasons for their change in tack.

Their MSCI EM macroecnomic model was pointing towards 12.0% potential upside, they said, describing the current state of affairs as an "attractive entry point" for the asset class.

They also retained their 960 point year end-2016 target price for the MSCI EM index.

Nonetheless, they also admitted there were risks to the outlook, including a continuing downward trend in GDP growth revisions, with or without China, "poor" momentum in terms of positive economic surprises and the rate of growth in EM industrial production was insufficient to justify outperformance by EM equities.