By Dion Rabouin
NEW YORK, Dec 27 (Reuters) - A number of global fund managers say they are buying emerging market assets for 2017 after the beating the sector has taken since the U.S. election in November, even though credit rating agencies have a less positive outlook.
Since the election of Donald Trump as U.S. president, emerging market stocks are down nearly 7.0 percent, based on the Morgan Stanley Capital Index, and the yield spread of emerging market bonds over benchmark U.S. Treasuries is wider by 10 basis points, reversing some of the gains seen earlier in the year.
On Nov. 8, the date of the U.S. election, the EMBI Global year-to-date total return was 14.04 percent, and a week later, on Nov. 14, it had halved to 7.60 percent.
Currencies such as Mexican peso and the Turkish lira have tumbled 10 percent or more in the wake of the election.
U.S. President-elect Trump has pledged to impose protectionist trade policies and restrict immigration which would likely damage most emerging market economies.
The Washington, D.C. bank lobbying group, the Institute for International Finance, reported this week that $23 billion has flowed out of emerging market funds since Oct. 4, with $18 billion of that taking flight since Nov. 9.
"The magnitude of outflows has diminished significantly in recent weeks, but the direction has remained persistently negative," said Scott Farnham, an IIF research analyst.
FUND MANAGERS POSITIVE
BlackRock, the world's largest asset manager is expecting to reap solid gains from all emerging market asset classes, especially bonds, the firm's chief fixed income strategist, Jeff Rosenberg said at the company's recent global outlook summit.
Other global fund managers also see a rebound on the horizon.
Ricardo Adrogué, head of emerging markets debt at Baring Asset Management Ltd, said analysts, including ratings agencies, are confusing structural versus cyclical problems when evaluating the sector.
"Our assessment of emerging markets is actually strengthening at the time that developed market institutional framework is weakening," he said.
Similarly, Michel Del Buono, head of portfolio strategy at Makena Capital Management LLC, who oversees $18 billion across asset classes, also has a bullish outlook.
"If you're exposed in the right way and you have a long-term perspective you should keep a significant weighting to emerging markets," he said.
Del Buono said he favors investments in things like healthcare, retail and for-profit education in places like Nigeria, Indonesia and the United Arab Emirates.
If prices keep dropping, Del Buono and Adrogué said they would keep adding to their positions, echoing what other investors told Reuters,