The Emerging Markets (EMs) Fixed Income survey conducted by Citi Research indicated that concerns about a U.S.-China trade war are increasing, as 37% of investors included in the survey considered that a potential U.S.-China trade war constitutes their biggest concern in the third quarter of 2018, up from 22% of investors who shared a similar opinion in the previous quarter. Also, 21% of surveyed investors cited capital outflows from EMs, 11% mentioned fears over a slowdown in the Chinese economy, 11% named an increase in U.S. interest rates, 10% cited higher inflation rates, 8% mentioned a U.S. recession, and 3% named fluctuation of commodity prices as their biggest concern in the third quarter. The quarterly EM Fixed Income survey is based on responses from investors managing about $380bn in assets. Citi noted that the majority of surveyed investors in the second quarter considered that U.S. President Donald Trump's threats of imposing tariffs on Chinese goods are a negotiation tactic, while 50% of investors in the current survey believe that the U.S.-China tensions will escalate into a trade war. In addition, the survey indicated that 45% of investors expect EM external sovereign credit to outperform all EM asset classes in 2018, followed by local fixed-income instruments (23% of investors), EM external corporate credit (20% of investors), and EM equities (13% of investors). In parallel, the survey showed that expectations of capital outflows from EMs are increasing, as 55% of investors anticipated moderate capital outflows in the next six months compared to 33% in the previous quarter. 
Source: Citi Research