A double dose of gloom from Capital Economics on Tuesday. Its proprietary EM GDP tracker – compiled from monthly data on output and spending as an advance proxy for GDP – shows growth slowing across emerging markets to its slowest pace since early last year. A separate report shows that while EM assets have suffered across the board this month, the pain has been particularly severe in Latin America and especially in Brazil.

First, here are the charts from the GDP tracker. They show growth across EMs slowing to 4.3 per cent year on year in July, down from 4.5 per cent in June. Capital says preliminary data for August suggest growth will be even slower, at 4.1 per cent. Continue reading »

South Korea’s benchmark Kospi index hit a three-year high this week on the prospect of rising dividends after the government announced tax measures aimed at unlocking billions of dollars in corporate cash reserves. It also unveiled a $40bn stimulus package to boost the country’s flagging economy as Choi Kyung-hwan, the new finance minister, promised to introduce expansionary fiscal policy. Continue reading »

By Sharon Fay of AllianceBernstein

Stock markets in emerging markets have gotten off to a rough start this year after a challenging 2013. Valuations have fallen and volatility remains high. So should investors add exposure to emerging markets—or is it better to steer clear?

In our view, it’s probably too early for a large tactical shift towards emerging markets. But we do think the time is right for investors who are underweight EMs—or who lack exposure altogether—to start rebalancing towards their strategic targets in developing-world stocks. While short-term caution is appropriate, we think EM stocks continue to provide a good long-term opportunity—especially for active managers. Continue reading »

The fondness felt by investors towards frontier markets has not dissipated since turmoil struck their emerging market cousins in October last year. In fact, feelings have climbed to a new pitch of devotion.

But the chart below raises an obvious question – has the ardour been overdone? Only rarely in the recent past have FM equity valuations traded at such a generous premium to EM counterparts. Continue reading »

Now that’s what you call a change in sentiment. Outflows from emerging market equity funds so far this year have already eclipsed net sales from all of 2013.

Outflows from EM equity funds in the week to Feb 5 were a whopping $6.4bn, after a $6.3bn outflow in the week before, according to data from EPFR and distributed by Barclays. Continue reading »

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 »

If investing is all about value creation, the latest batch of figures from Brazil’s central bank make for sobering reading. They show the rich returns you can make when investing in Brazil goes right – and the huge losses that result when it goes wrong. Over the past three years, foreign direct investors and buyers of Brazilian portfolio assets have suffered value destruction on a colossal scale.

An analysis of central bank figures by beyondbrics shows that ,taken together, flows of foreign direct investment to Brazil and foreign investment in Brazilian portfolio assets were worth more than $260bn between January 2011 and November 2013. Over the same period, in spite of those inflows, the value of such assets held by foreigners fell from $1,351bn to $1,327bn, a loss of $24bn, implying value destruction of more than $284bn in less than three years. Continue reading »

Frontier markets climbed by almost a third over the past year, while emerging markets fell. James Mackintosh, investment editor, analyses why and whether this can continue.

China’s IPO season has officially reopened. Five companies said on Tuesday they had received approval from the China Securities Regulatory Commission to issue new shares, bringing China’s longest ever IPO drought to an end. Continue reading »

The 8th in our series of guest posts on the outlook for 2014 is by John-Paul Smith of Deutsche Bank

We continue to recommend that investors underweight emerging equities in a global portfolio, despite the MSCI EM having under-performed the S&P by almost 30 per cent in 2013 and by more than 50 per cent over the past three years. We are no longer especially optimistic about US equities going into 2014, as valuations now appear to price in the underlying strengths of the economy and corporate sector, but the relatively low level of valuations of emerging equities does not yet offset the more negative fundamental factors. Continue reading »

If you had $100 at the start of 2013, and took a punt on a few emerging market exchanges, which ones would have made you a fast buck, and which would have reduced you to tears?

Beyondbrics takes a look at the best and worst performers in 2013. Continue reading »

Frontier markets are up 15 per cent in 2013, compared with a 2 per cent rise in emerging markets. Rob Minto of beyondbrics looks at the factors driving the success of frontier markets, and at whether investors have missed the rally.

Have investors yet again changed their minds about Brazil? After tanking for the first half of this year, Brazilian stocks have staged a recovery and on Tuesday reached their highest level since March 18. Over the past three months, as the chart above shows, they have comfortably outperformed the MSCI Emerging Market index and the S&P 500, and have left in the dust their rivals to the north in the form of Mexico’s IPC index. Continue reading »

The Warsaw Stock Exchange has long been hunting for new listings far beyond Poland’s borders, but if it looks much further than its latest new IPO it will fall into the Pacific Ocean.

The exchange’s newest listing comes from China – Peixin International Group, a manufacturer of paper products like sanitary napkins and diapers. Continue reading »

By Mark DeWeaver and Ali Albazzaz (l)

The steadily worsening security situation in Iraq has led many to wonder whether the country is once again descending into anarchy. A recent New York Times article, for example, spoke of “new fears that Iraq is returning to the bloody sectarian violence that nearly tore the country apart in 2006 and 2007”.

Going by the news feed, casual and informed observers alike might well conclude this to be a plausible outcome. Yet home-grown Iraq Stock Exchange (ISX) investors – some of the most knowledgeable insiders around – don’t seem to think so. Continue reading »