Emerging markets delivered strong returns during the second quarter of 2017. Under very lax global financial conditions, positive, albeit subdued momentum in global economic activity combined with the moderate pace of global monetary tightening supported asset prices further.

Furthermore, emerging markets reacted favorably to the reduction in quantitative easing by the European Central Bank (ECB) in April and the rate hike by the US Federal Reserve in June. Concomitantly, potential shocks from elections in the second quarter did not materialize (France, Turkey, Mexico), while other geopolitical risks remained contained (Middle East, North Korea). All the aforementioned factors supported low and stable volatility during the second quarter, an environment conducive for carry trades and allocations to riskier asset classes.