LONDON (Reuters) - JPMorgan said it had reduced its emerging markets risk for the second time in as many months on Monday following the set-back in U.S-China trade talks.
The bank said it had moved to a small ‘underweight’ in EM FX and though it was keeping an overweight on EM rates markets given globally supportive central banks, it had shifted OW duration positions from high yielders to low yielders.
“A change of course in trade negotiations is against consensus and warrants reducing EM risk further given OW (overweight) positions,” a note by the investment bank’s analysts said.
“The outlook for EM fixed income was already mixed before last week’s unexpected turn in trade talks, and EM positioning is caught the wrong way.”
JP Morgan had already cut its emerging markets risk in FX and sovereign credit to neutral from overweight at the end of March, it added.
MSCI’s emerging-market currencies index has slipped around 1.9 percent since April 17, weighed down by concerns about the re-escalation in trade tensions between the United States and China.
Reporting By Tom Arnold; editing by Marc Jones