According to Geoff Yu at BNY, emerging market (EM) equities in the EMEA region have shown notable outperformance, with strong buying activity observed in Poland, South Africa, and Turkey since before the July Federal Reserve meeting [1]. This trend persisted over the past week, which included the U.S. Treasury buyback announcement, with these three countries ranking among the top five best-bought equity markets based on BNY's flow data [1].
Yu emphasizes that the positive momentum in EM EMEA equities is not a short-term phenomenon, but rather a continuation of strong buying that began prior to the July Fed meeting [1]. He notes that the diversity of EM EMEA markets means that flows are driven by country-specific and sectoral factors, rather than a uniform narrative tied to U.S. monetary policy or a general debasement theme [1].
While low U.S. dollar real rates or global real rate weakness may provide some support—particularly in markets like Poland, South Africa, and Turkey, which offer duration lift and attractive dividend yields—Yu cautions that U.S. equity diversification is not synonymous with an EM beta trade [1]. He observes that cross-border holdings of U.S. equities have improved, leaving only marginal room for additional flows into EM equities, and stresses that any such flows will be highly selective [1].
Yu further points out that if a 'debasement' theme were driving EM equity flows, EM Americas would likely benefit more due to heavier commodity exposure, as seen in Q1 with Brazil and Peru, the latter of which gained from a surge in silver prices [1]. Looking ahead, BNY continues to favor high-carry EM duration as a hedge against dollar risk, while expecting EM equities to depend on idiosyncratic factors and broader shifts in asset allocation preferences [1].
CONCLUSION
EM EMEA equities have outperformed on the back of country-specific and sectoral flows, particularly in Poland, South Africa, and Turkey. The market impact is medium, with future performance expected to hinge on idiosyncratic factors rather than broad U.S. monetary themes.