Investment Rating - The report does not explicitly provide an investment rating for the emerging markets (EM) sector, but it discusses the current state of capital flows and economic conditions, indicating a cautious outlook due to various factors affecting inflows [2][4][14]. Core Insights - The report highlights a "sudden stall" in capital flows to emerging markets, with cumulative net outflows of $27 billion through April 2025, driven primarily by portfolio investments [10][14]. - Despite a weaker dollar acting as a push factor for inflows, the lack of stronger growth in emerging markets limits the pull factor, resulting in sluggish inflows [7][9]. - The report notes that current accounts in emerging markets are generally in good shape, which has insulated them from significant macroeconomic damage despite the capital flow challenges [14][16]. Summary by Sections Economic Overview - The report discusses the elevated probability of a US recession at 40%, with uncertainties surrounding US trade policies and geopolitical risks impacting global economic conditions [1]. - It mentions that the dollar has weakened significantly since March, which typically would benefit emerging markets, but this has not translated into expected inflows [2][4]. Capital Flows Analysis - The report identifies both push and pull factors influencing capital flows, with a weaker dollar serving as a push factor and the growth differential between emerging and developed markets acting as a pull factor [3]. - It notes that portfolio inflows have been weak since October, with a significant outflow of $115 billion in April 2025, attributed to market turmoil [10][12]. Growth and Inflation Outlook - The report suggests that domestic demand in emerging markets remains soft, and any escalation in tariffs could skew risks further to the downside, impacting growth differentials [9]. - It emphasizes that while inflation is expected to move lower, some central banks in emerging markets may have room to cut rates due to contained macro risks [14][16].