Displaying items by tag: emerging markets

Monday, 10 September 2018 09:57

EM Trouble May Spread to China

(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.

Published in Eq: EMs
Friday, 07 September 2018 09:58

How EM Contagion Could Spread to the US

(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.

Published in Eq: EMs
Thursday, 06 September 2018 10:11

JPMorgan Warns EM Contagion Spreading

(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.

Published in Eq: EMs
Wednesday, 05 September 2018 09:45

Emerging Markets Might Be in for a Full Blown Crisis

(Buenos Aires)

A couple of weeks ago investors seemed ready to accept that the brief emerging markets selloff was just a minor Turkey-induced tantrum, but would not blossom into something worse. Well, that view seems to be waning, as the selloff in EMs has spread and is starting to have all the hallmarks of a full crisis. One analyst summarized the situation this way, explaining that this has all the hallmarks of an EM crisis: “a large dose of debt and an associated domestic credit bubble, including misallocation of capital into uneconomic trophy projects or financial speculation. Then add: a weak banking sector, budget deficits, current-account gaps, substantial short-term foreign-currency debt and inadequate forex reserves”.


FINSUM:EMs are facing a lot of headwinds, but the economies in most of them seem healthy, so hopefully the problems will be contained to just the most troubled (e.g. Turkey and Argentina).

Published in Eq: EMs
Tuesday, 04 September 2018 10:30

Pimco Says there is a Big Opportunity in EMs

(New York)

Pimco, long-time leader in fixed income, has just gone on the record saying there may be some good opportunities in emerging markets. The company’s CIO sees the major turmoil in EMs, but says they offer opportunity. With all the selloffs, Pimco says “There are clearly a lot of challenges in emerging markets. But we see a little bit of value. It’s beginning to look interesting … We don’t see the same complacency in emerging markets as we do in other markets … We are more buyers than sellers”. For instance, Pimco is a major holder of Argentinian debt, and favors the country over Turkey.


FINSUM: With all the currency weakness and selloffs, there are certainly some good opportunities. However, this is an area where we may favor active management, as it takes a lot of work and insight to understand the internal dynamics of EM opportunities.

Published in Eq: EMs
Page 7 of 11

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…