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00:00When I think copper I think she lay copper surging the Chileancurrency on a tear also read a story today two is really doing well with the vaccine rollout. How much is their economy reallyhumming thanks to this sort of commodity boom that we're seeing right now.Yeah. Copper has been a key part of the outlook for Chile and as you mentioned February it's been a particularly good month. Whenwe look going forward partially it's been tied to the reflation reflation story globally but also particularly in China andother areas that have had this demand for industrial metals. On top of that though as you mentioned Chile has had a really goodvaccine rollout so far and not just good compared to the emerging market countries but good compared to developed marketcountries where it's from the ninth from the world's best number of vaccinations per hundred people. So certainly a lot of it islooking like it is going Chile's way. And as we go forward it also stands out as a country that has a relatively low debt loadand still additionally more room to stimulate going forward. OK so low debt load feed across that for some of the countriesthat from as we speak to the yields surge that we're seeing in U.S. and indeed globally we have seen the gas taken off thetrade to a certain degree MSCI all country MSCI emerging market index not faring well today. Where else is going to fare. Welllike Chile. Where else isn't it. Yeah it's gonna be key to watch how the U.S. farm story evolvesparticularly on the real yield side how that trade evolves. But certainly what we've seen today is that emerging markets aregoing to be the most sensitive to these rising US yields story. And at first it seemed like we were in this situation where wecould have a better growth outlook and still have low yields in the US which would have been really Goldilocks for em. Now it'sseemingly there is going to be higher yields and that that will end up benefiting or hurting the countries that have the highestparticipation foreign participation in their debt markets. So areas like Malaysia like South Africa wind up having a decentforeign population share that could potentially bring money back and reallocated to higher U.S. Treasury yields. So talks aboutwhat's happening in the currency space here because it seemed like the narrative for a while before we got to talking aboutcommodities and this rising yields it was all about the direction of the dollar here. We saw some of those carry tradeslast year break down at least those that were sort of tied to the U.S. dollar. Is that carry trade still being taken. And ifso what's the funding currency right now. Yes there's still the carry trade at play but yields are notablyin the carry that you earn is somewhat lower even. I think Mexico stands out as having some of the highest carry stillavailable and yet they're still set to continue easing policy cutting rates as we go forward. So a lot of that rate advantagehas been eroded. And then look at Brazil at 2 percent from the celebrate but at the same time there is still carry to be pickedup. The problem is whether you can justify that with the country fundamentals and the volatility with the carry you're getting.And unfortunately that's shorter carry has meant not as much particularly against the dollar. I guess now what we're morelooking at is either relative value plays so doing cut finding country versus country comparison and sort of stock pickingemerging markets among the group or playing it by funding it through the Japanese yen or other funding currencies. So one ofthe stories of the last several months has been and maybe it's not as intense as a post grade financial crisis but there is alot of Chinese buying going on across commodities across agricultural commodities restocking of their commoditystockpiles. How much is a lot of this discussion predicated on the continuation of trends in China. And what are you watchingout of there from a sort of all policy domestic economy standpoint.Yes the China policy has been meaningful. I think though notably it hasn't been as meaningful as it had been after the greatfinancial crisis or even after 2015 where we saw sort of that that E.M. currency sell off. China stepped in more there to kindof provide policy accommodation that helped reflate the whole emerging market complex. When I look forward to this year Ithink of China as more sort of stepping off the gas rather than putting their foot on the brake in terms of the policy space.Certainly they are starting to become less accommodative. They're providing less of that juice and that's mostly becausethere's less juice needed. We've talked about the normalization in China before and that certainly still holds true. So withthat being said we do expect authorities to start to take their foot off the gas. And that could take some of the steam out ofthat. China. China proxies trade going forward. I mean you just prior to you coming on talking to a lead editorin emerging markets about Brazil but your perspective on what happened over the course of the weekend and whether Brazil isstill an investment opportunity. Yeah we are watching Brazil closely. Certainly the developmentssince Friday isn't positive. I think the more important things to watch going forward are one the inflation print this weekwhich will give more direction on how quickly the central bank rate hike and by how much. And then additionally the discussionsover the fiscal package that put through Congress that is incredibly popular football scenario amongst his following andcertainly being able to offset that with other fiscal measures will be taken very very friendly by the market and could end upmeaning that most of the bad news is already in the price. That's what ifs. And so why did you then wrap it up for us here.Emily here. I mean for those folks maybe I mean we obviously talk to a lot of folks are already sort of deep into this tradealready. But there are folks who are sort of looking to diversify beyond the U.S. beyond the developed marketsparticularly now with the current economic global economic cycle that we're in. I mean what's the general I guess view that youwould give them with it with how you would approach this at this stage. You know we are still cautiously optimistic emergingmarkets. It still stands out as one of the better plays going into the rest of this year. That being said there is going to beidiosyncratic stories. So we prefer playing it through the most exposed on the commodity front. The countries that like RussiaColombia Chile have that first connection to the biggest reflation trade that we're seeing in the commodity space. Butstaying you know maybe being a bit more cautious. Places like Brazil waiting for some of the domestic issues to sort of workthemselves out before dipping another toe in. Finally and just real quickly I mean U.S. policy in terms of notjust this current stimulus but perhaps a bigger build back better planned if that happens later this year how much doesthat in theory provide yet even further in polls across some of the aims your watch.Yeah that's a great point. It does provide that additional impulse. And really what's been key is making sure that it's aglobal growth led recovery and not just a growth recovery led by either the US or China which as we've seen in different varyingforms can lead to varied outperformance. But getting more countries onto that fiscal impulse and onto that spending oninfrastructure would certainly be a positive.

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Emerging Markets The Most Sensitive to Higher U.S. Yields: Emily Weis

Emerging-market stocks tumbled and currencies declined as U.S. Treasury yields rose. MSCI Inc.’s gauge tracking developing-nation equities posted its biggest drop since May. Emily Weis, emerging markets strategist at State Street, speaks with Bloomberg's Caroline Hyde, Romaine Bostick and Joe Weisenthal on "What'd You Miss?" about how the reflation trade is affecting emerging markets. (Source: Bloomberg)

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