2016 can be another year of weak performance for the emerging markets. USD/CNY chart will have significant impact on emerging market currencies and equities. In the second half of 2015, sharp devaluation of the Yuan resulted in a sell-off in emerging market equities. Current technical outlook for the USD/CNY suggests further devaluation for the Chinese currency is likely in the coming months. A runaway price movement on USD/CNY can trigger another wave of selling in the emerging market equities.
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Already, emerging market equities are underperforming the developed markets. This trend is likely to continue if the above two (sharp devaluation of the Chinese Yuan and another sell-off in emerging market equities) takes place in the following months.
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