EM equities to see further weakness pressured by higher US Real Yields and stronger USD – Credit Suisse

MSCI EM has been in a clear medium-term downtrend since the peak in February 2021. In the view of economists at Credit Suisse, emerging market equities are likely to remain under pressure on both an absolute and relative basis during 2022. 

EM equities have completed a clear bear “triangle” continuation pattern

“Weekly MACD momentum is now negative and the 200-day average has started to fall, having already been crossed by the 55-day average earlier this year. Furthermore, the market has completed a clear bear ‘triangle’ continuation pattern following the recent sustained break below the 12316 low of August, which suggests further weakness is likely.” 

“We look for a break below the 38.2% retracement of the 2020/21 recovery at 1183 to open up a move to the January 2020 high at 1151 next and then the 50% retracement at 1101/00, where we would be alert for signs of a floor.” 

“On a relative basis, the MSCI EM/DM Ratio remains in a clear medium-term downtrend and we expect that rising real yields and a stronger USD will continue to weigh on the market on both an absolute and relative basis.”