Global Emerging Markets in Pictures: Summer Roadmap by Merill Lynch

EM sell-off should end once…

…we see large fund outflows (happening), stabilization of risk appetite (not yet) and the re-appearance of value (happening). A bounce is imminent we think.

Bull market should resume later in 2006, once…

…inflation/stagflation fears abate, global growth consensus shifts from “no landing” to “soft landing” and Chinese stop tightening, in our view.

2006 Roadmap

We think 2004 offers a useful summer ‘06 roadmap for investors. EM traveled from “panic” to “rebound” to “summer consolidation” in ’04 (see Chart 1). 2006 journey should be similar. Once this “panic” is over, “fallen angels” and “cheap conviction stocks” are likely to outperform.

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