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_RisinginterestratesFigure4ChinainationandinterestratesEmerginginvestmentmarketsThequestionishowcanwebenetfromthelongertermpositivetrendsoftheemergingeconomieswhilstinsulatingourselvesagainstandindeedbenetingfromincreasedshortertermvolatilityinthesemarketsTheansweristotakealongshortstrategyacrossmultipleassetclassesi.e.equitiesxedincomecurrenciesandinterestrates.Ourgeneralpropositionisthathigherlevelsofinationwillpromptappropriatepolicyreactionsfromemergingmarketgovernmentsovertheneartermwhichinturnmayactasabreakoncorporateearnings.Thiscouldfeedthroughtoasloweremergingequitymarketrelativetodevelopedpeersovertheshorttermbeforetheinationaryissuesettles.Meanwhilecorporatecreditmaypauseforbreathfollowingasolidrun.Coupledwiththiscentralbankandgovernmentinterventionshouldheraldopportunitiesinratesandcurrencymarkets.ReviewingeachassetclassinturnInationfromseveralroundsofquantitativeeasingindevelopedmarketsisnowmakingitswaythroughtodevelopingeconomies.SupplypressuresindevelopingnationsarebecomingmoreseriousandthereareevensignsofwageinationpressureinpartsofChinaandBrazil.Thatisbeforewetakeaccountofrisingcommodityprices.ExampletradesWithinationpickingupacrossmanyemergingmarketregionstherearesignicantopportunitiestobenetfrompotentialratehikese.g.MexicoTurkeyandChinag4.BywayofcomparisonthestrengthoftheBrazilianRealandrelativelystableinationpresentsanopportunitytoshortinterestratesthereg5.CpiChange-ChinaP.R.MainlandBankRateEndOfPeriod-PercentPerAnnum-ChinaP.R.MainlandSourceFactSetPrices