Declining commodity prices to keep pressure on EM assets

Emerging Markets are largely net exporters of commodities. Hence if the commodity prices keep declining, EM assets are likely to remain under pressure. Currency market stabilisation will be key to assess investor appetite for EM assets.

China's economy has had a slow start to 2016. China PMI figures released over the weekend once again have confirmed the slowing in the world's second largest economy. Weak data will likely further add 'downward pressure' on commodity prices.

The official PMI for January came at 49.4, lower than December's reading of 49.7 and below the forecast figure of 49.6, contracting at its fastest pace since August 2012. Poor China's PMI data is denting commodities' prices, Brent oil prices fell, after a four day winning streak.

Weak economic data from China and falling Chinese equity markets are ensuring that metal prices are not able to continue last week's upward movement this morning. Copper is hovering just above the USD 4,500 per ton mark, aluminium has dipped to USD 1,500 per ton and nickel is trading at around USD 8,500 per ton.