Here’s a quick update on emerging market economy growth in February from HSBC – and the news is not great.
The HSBC Emerging Markets Index, a monthly indicator derived from HSBC’s PMI surveys, fell for the third month running to 51.1 in February, from 51.4 in the
first month of 2014. Continue reading »
By Michael Power of Investec Asset Management
The Brics acronym has captured investors’ imagination like few others. But has it really helped us understand the intrinsic nature of the risks and rewards in the emerging market (EM) asset class, thereby allowing us to profit from investing in it? I have long had my doubts and recent turmoil in the asset class has only confirmed them. So is there a better way of understanding this asset class? My conclusion is that we should move away from the prism of Brics – and indeed some of the other acronyms now flavouring this alphabet soup – and instead think of EMs in terms of blocs.
There is a pressing need to do this: the paradox of investing in EMs is that whilst the structural case for doing so is overwhelming, it remains an asset class that is still both cyclically risky and very volatile. This suggests the right question to ask is no longer “whether” to invest in EMs, but “how”. And in answering this “how”, we must above all acknowledge that not all EMs were born alike. Continue reading »
These days, Jim O’Neill doesn’t bother much with “Brics” – the moniker he invented. The former Goldman strategist is more into “growth markets” instead. So – is it time for him to look more closely at the FTSE100, rather than the Bovespa?
Based on the new Bank of England projections, the UK economy is set to grow at a 3.4 per cent clip this year. Not too shabby. Less shabby still when compared with the supposedly “high growth rates” in certain parts of the emerging world. Continue reading »
Turmoil, panic, retreat: it’s not been a pretty start to the year for emerging market currencies and stock markets. Here, in seven charts, is the story of 2014 so far. Continue reading »
Investors have had a tough start to the year, with declines across the board on the back of concerns about growth in emerging markets. Howard Silverblatt, a senior analyst at S&P Dow Jones Indices, wrote on Monday that EM equity indices lost 6.4 per cent in January, compared with a loss of 3.47 per cent for DM equity indices.
Overall, 39 out of 46 broad market indices tracked by S&PDJI were down in the month. Continue reading »
It’s a risky time to be investing in emerging markets. John Authers looks for opportunities and finds that emerging market exporters and frontier markets might be underpriced.
As emerging markets remain rattled by investor jitters, Raghuram Rajan, India’s central bank governor, has resurrected a gripe of old by attacking the US for its lack of concern about the global impact of its withdrawal of extraordinary monetary stimulus.
Mr Rajan, a former chief economist for the International Monetary Fund, told Bloomberg India TV that “international monetary co-operation has broken down.”
“Industrial countries have to play a part in restoring that [co-operation], and they can’t at this point wash their hands off and say, we’ll do what we need to and you do the adjustment.” Continue reading »
By Marcus Svedberg of East Capital
It is arguably not very easy to be an emerging market optimist these days. It seems almost everything and everyone is against the group of markets that were once such investor darlings. Tapering is the most obvious cause for pessimism but there is more to it. The fact that economic growth decelerated and was revised down by most analysts for most of last year did not help. That, combined with concerns about longer term economic and political sustainability in a number of large emerging markets, resulted in weak stock markets during a year when developed markets rallied to new all-time highs.
But perhaps the biggest reason optimists like myself are struggling right now is because the policy response has been weak and in some cases even counter productive. Continue reading »
What will the EMs next “black swan” be? With the crash of the Argentinian peso, the difficult Syrian peace talks in Montreux, and Iran’s nuclear situation, WEF participants last week had enough scenario’s to reflect on. But one fear of Davos participants about emerging markets was a rather unexpected one: the EM middle class.
Nouriel Roubini, in the CNN debate on Emerging Markets, was quick to point it out. “Paradoxically, it’s not the proletarians that are in the street in countries like Brazil, Chile, India, or Ukraine,” he said. “It’s the middle class. They’re becoming restless.” Continue reading »
Following on from the sharp fall in the Argentinian Peso last week, the Emerging Markets sell-off has spread to Asia. Mitul Kotecha, head of global equities Asia at Crédit Agricole CIB, says problems in Thailand and upcoming elections in India and Indonesia are making investors uncomfortable, especially now that tapering is causing capital outflows from the region.
For all the talk of differentiation, emerging markets are having a bad Monday. Major currencies, such as the Turkish lira and Indian rupee have been hit; equity and bond markets are falling. As Benoit Anne of Société Générale put it, “global emerging markets are now trading in full-blown panic mode”.
But the recent message to investors from analysts was to look beyond emerging markets as a single asset class. “The real lesson from recent events is that the need for investors to discriminate between individual EMs has never been greater,” said Neil Shearing of Capital Economics. Clearly, the lessons are not being heeded. Continue reading »
After the Argentine peso depreciated sharply at the end of last week, talk has begun of a wider EM rout. Once engines of growth for the global economy, emerging markets are now seen as vulnerable with signs of weakness emerging in the Chinese economy and the US Federal Reserve reeling in its asset purchase programme, adding to domestic woes.
While the spotlight was on Argentina on Friday, how unstable are markets in India? Continue reading »
On Friday evening in Davos, Paul Kagame, Nouriel Roubini and Carlos Ghosn discussed the next steps for emerging markets. Do you want to know what their predictions were?
EM private equity investors don’t. “We don’t get our EM news here from public debates,” says Paul Fletcher, from PE firm Actis, at Davos. His former colleague Sev Vettivetpillai agrees agrees: “You need to be on the ground yourself to understand what’s happening.”
However, they didn’t mind sharing their view on EMs. Continue reading »
Suddenly, it feels like 1997 all over again. The biggest one-day swoon of Argentina’s peso on Thursday was more than a little reminiscent of the day 16 years ago when the Thai baht was driven into free fall, triggering a wave of contagion through Asia, writes James Kynge.
However, economists said that such similarities only go so far. While there are clear vulnerabilities or evidence of economic mismanagement in several emerging markets, including Venezuela, Ukraine, Turkey and South Africa, the frailties that Argentina succumbed to are not broadly representative. Continue reading »