The global central bank rate cut cycle continued in October. Following the Fed rate cuts in September and October, numerous central banks have followed suit, including key EM economies like India, Turkey, Brazil, Malaysia, and Thailand, which can provide a better support for the local economy.

Other than monetary policies, we continue to see more non-monetary policies being enacted to further incite business investment and personal consumption. The Malaysian plan to extended tax benefits to companies for establishing regional or global hubs in the country is an example for attracting investments and creating skilled job opportunities, targeting to leverage the risks from the Sino-US trade war and convert it to an opportunity, transforming the country’s economy. Other measures are also adopted in EM economies, for example Thailand is also looking into adopting a tax cut for its citizens to boost consumption, while India continues to further tax incentives for corporations and individuals. Similar measures could possibly drive better economic growth for the mid to long-term in spite of global political uncertainty.

Yet, the easing but yet ongoing trade war remains one of the biggest threats to EM economies. While the global manufacturing sector remains shaky fundamentally, Vietnam and Taiwan alike should continue to benefit from the effects of the trade war as production line consolidation continues. Although the general market sentiment has greatly improved with the progress in the Sino-US trade talks, the underlying downside risks have yet to subdue, investors should continue to exercise caution over emerging markets with an emphasis on the trade talk progress. Our view on the overall 2019 EM outlook remains neutral.