Citigroup says, “It must nevertheless be said that, relative to prior episodes of global risk aversion, emerging markets have held up better – so far – than usual.” The bank believes that, “Although there is no doubt that a serious US economic downturn would pose a threat to emerging market economies, the current scenario -marginally weaker US growth, probably associated with more accommodative US monetary policy – is hardly insurmountable for emerging markets.” Citibank concludes, “As we see it, the global storm may continue for some time, but this spike in volatility indicates to us that we could be nearing a low point in sentiment… and prospects for the CEEMEA region are unlikely to be significantly impaired unless we get hit with either a truly prolonged bout of market turbulence that siphons off capital flows significantly, or a deterioration in the outlook for the global economy neither of which we anticipate. We thus see CEEMEA equities ending the year higher than they are today. The facts remain: Earnings growth is ongoing, valuations are at sustainable levels, foreign corporations continue to seek out emerging markets assets, and global interest rates may no longer be rising. Not a bad scenario.”

Citigroup has revised its recommendations for a number of emerging markets: Poland and Hungary have been downgraded to “Underweight” and “Neutral”, respectively, Russia and South Africa have been upgraded to “Overweight” and “Neutral”, respectively; Israel and Egypt have been kept at “Overweight,” and Turkey kept at “Underweight”. (globes.co.il)