Emerging Markets

(Beijing)

The pain rippling through emerging markets has spread from Turkey and Argentina to Indonesia, the Philippines, and South Africa. Some are calling the major selloffs a full blown crisis. Now, a big threat looms as the trouble may spread to the big one: China. The major worry is that the pressure on EMs, coupled with rising US sanctions on China, could conspire to drive the Yuan down as much as 15%. Other EMs would be forced to weaken their currencies, and the pandemonium could hit the global economy and markets in a way it hasn’t so far.


FINSUM: China’s weight looms large not just in an economic sense, but in the market’s psychology. If real trouble started to flare up there, it would quickly spread to western markets.

(New York)

There is a lot of turmoil going on in emerging markets right now. So much so that many are now considering it a full crisis. So far, though, the problems have yet to materially impact US markets. However, Barron’s explains that there is a mechanism through which EMs could cause trouble for the US and the rest of western markets. Because the trade war with China continues to escalate, the country’s yuan may devalue significantly, hurting all EMs. If this happens, the ripple effects through the global economy might be very strong. India and Mexico seem to be the safest EM destinations at present.


FINSUM: China is big enough to bring down the whole world economy, so the real threat here is the trade war first, and then how EMs compound that problem.

(New York)

The big rout in emerging markets is starting to look like a full blown crisis. So far the US has proven itself immune to the turmoil, but the contagion is spreading, according to both JP Morgan and BlackRock. The pair say that a herd mentality has taken hold and that investors are indiscriminately selling emerging market assets, so matter what the value or long-term outlook. Even those with holdings that look strong are selling for fear of getting trampled by the rest of the herd, thus feeding the cycle further.


FINSUM: The big selloffs now include not only Argentina and Turkey, but South Africa, Brazil, and Indonesia. Given the Fed’s hawkishness and trade wars roaring, there is no end in sight for the turmoil.

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