Nomura's Subbaraman: Why We're Cautious on EM

The video discusses the impact of Trump's 'America First' policies on emerging markets (EM), highlighting the challenges faced by these economies due to trade protectionism, tighter immigration, and foreign policy changes. It examines the financial vulnerabilities of EM, particularly in Asia, due to debt accumulation and potential capital outflows. The video also explores the uncertainty in EM and the fiscal policy responses available in Asia. Additionally, it analyzes Mexico's economic challenges and the geopolitical risks in Asia, emphasizing the interconnectedness of trade and foreign policy.

What is a potential negative impact of Trump's 'America First' policies on emerging markets?

• Lower interest rates

• Trade protectionism affecting open economies

• Stronger local currencies

• Increased foreign investments

Why are emerging markets vulnerable to higher US interest rates?

• They have built up significant debt since 2008

• They rely heavily on domestic consumption

• They have surplus capital inflows

• They have no foreign debt

What could be a consequence of capital outflows in emerging markets?

• Decreased bond yields

• Increased credit defaults

• Stronger local currencies

• Lower market rates

How might Asian countries respond to economic challenges compared to Latin American countries?

• By increasing trade barriers

• By devaluing their currencies

• By utilizing fiscal policy responses

• By reducing foreign reserves

What geopolitical regions are highlighted as potential hotspots due to US foreign policy?

• The Arctic Circle

• The Amazon Rainforest

• The South China Sea and the Korean Peninsula

• The Mediterranean Sea