There is no doubt that emerging market (EM) investors have cheered up considerably of late. Following a torrid January and February, virtually all asset classes in the EM universe appear – on aggregate at least – to be gaining in value.
The bellwether stock index, the MSCI EM index, is up 9.6 per cent from its low on February 5. EM sovereign bonds are yielding an average of 5.51 per cent, down 0.37 per cent since January 1. Local currency bonds are, in many cases, producing stellar returns sharpened by windfall currency gains. Indeed, some EM currencies are among the world’s best performers, with the Indonesian rupiah rising 7.81 per cent, the Brazilian real gaining 7.3 per cent and the Indian rupee climbing 2.8 per cent so far this year. Continue reading »
Emerging markets are redrawing the map of global trade in high-tech goods with several countries in developing Asia vaulting up the global rankings both in terms of exports of high-tech products and in R&D spending, a new HSBC research report finds.
Much of developing Asia’s ascendance is driven by China’s near six-fold increase in its total share of world exports of high-tech goods to 36.5 per cent in 2013 from a mere 6.5 per cent in 2000 (see chart), HSBC found. The US, by contrast, saw its share of total high-tech exports fall to 9.6 per cent from 29.2 per cent in the same period. Continue reading »
For many emerging markets, the most worrying aspect of Chinese economic statistics announced on Thursday is that they reveal a slump in the construction spree that has sucked in vast quantities of metal ores and other commodities from Latin America, Africa, Russia and parts of Asia.
But which EM economies are most vulnerable as China throws the commodity cycle out of joint? Craig Botham, emerging markets strategist at Schroders, has come up with a vulnerability ranking (see chart) that identifies the exposure of EM countries to a slowdown in net non-food commodity exports to China. Continue reading »
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.