Important Links

Emerging Markets Investment - Banks, Why Are They Attractive Now? - Citi UK

16 October 2017Emerging Markets
Emerging Markets Investments - Market Insights - Citi UK
  • According to Citi analysts, investors' biggest concern when it comes to investing in banks relates to credit quality – in particular, banks' exposure to foreign-currency-denominated corporate loans. However, corporate free cash flows in emerging markets (EMs) have improved and so has credit quality. Profits have also begun to rise and debt is now more in local than foreign currencies.
  • Asia EM's debt profile has moved from predominately overseas debt to a greater percentage being in local currencies. In Asia (except Japan): 70% of the debt is in local currencies, 13% in USD and 16% in other currencies. Both Hong Kong and Singapore – as financial centers – have the highest weight in foreign versus local currencies according to Citi analysts.

  • However, banks and financials rank highly in Citi's models as investors gradually warm up to the idea of owning financials and even banks of late. Citi analysts continue to see merit in owning financials in an EM portfolio, as banks generate the second-highest returns in EM, lagging just behind the energy sector.
  • The financials sector has delivered the second-highest earnings growth since the global financial crisis; it is the only sector now at a lower price-earnings ratio. According to Citi analysts, the most attractively priced banks are predominantly Chinese and some Korean – while the more expensive banks are generally in India or Indonesia.
  • Citi's view is that besides holding value, banks and the financials sector also offer good earnings revision as well as price momentum – all great attributes for performance, especially in the fourth quarter of this year.

Our recent research

Fed's Greenlight for EM Central Bank Easing

Fed's recent rate cut has opened doors for Emerging Market (EM) central banks to do the same, without having to worry about FX instability and capital outflows.

Find out more

EconomicsPoliticsEmerging Markets

Trade Tensions Escalate as Trump Raises Tariff Threat Again

Citi analysts expect Trump’s threatened 10% tariffs on US$300bn of Chinese imports to come into effect, with scope for tensions to further escalate.

Find out more

EconomicsPoliticsUSEmerging Markets

Volatility in Sight as Yuan Breaches Key 7 Level

USDCNY spot onshore pushed past 7 this morning following the USDCNY 9.15am fixing that was allowed beyond 6.90, a level that was held so far this year. 7.00 is a key psychological level and a breach is likely to raise anxiety over further complicating US-China talks and weighing on broader risk appetite.

Find out more


Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.