Double-digit emerging market stock returns in 2019 — Goldman

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EMERGING MARKET equities look set to post double-digit returns next year after a tumultuous 2018 in which they tumbled into bear market territory, according to Goldman Sachs Group, Inc.

With the US economy likely to expand through 2020 and China managing its bumpy slowdown with bouts of stimulus, developing-nation shares will probably return 12 percent in dollar terms while assets as a whole will post modest gains in 2019, Goldman strategists led by Kamakshya Trivedi in London wrote in a report. They cite improving growth outside China, cheaper valuations and the home stretch of Federal Reserve tightening.

“Returns may be better for the next six months relative to the subsequent six months, especially if concerns about the next US recession grow over that time,” the strategists wrote. “Volatility is also likely to be elevated around this narrow path to positive performance as these risks ebb and flow.”

Goldman said emerging market stocks offer the most upside, particularly after the major drawdown in Chinese shares. Developing-nation currencies will probably climb by 2 percent on average amid a weaker dollar, while local rates return around 10 percent and sovereign bonds return 5.5 percent. — Bloomberg