Invest with care in emerging markets
AFTER more than a decade as a global market darling, emerging market equities and bonds have suffered a humbling comeuppance. Over the past three years, returns have turned negative; the broader MSCI Emerging Markets Index has been relatively resilient with an annualised loss of 3 per cent, compared with a loss of more than 9 per cent per annum for Latin America.
Not surprisingly, some are raising the question of whether the structural growth story that had long underpinned expectations for emerging assets is finally over. For now, among investment strategists, the consensus view remains in favour of developed markets such as the US and Europe, and to give emerging markets a miss. There are a few reasons for this view, foremost of which is that a tapering of quantitative easing (QE) measures - widely expected by the first quarter of 2014 - would trigger fund outflows and hurt emerging markets. Markets saw a dry run of this scenario earlier this year.
There are a number of fundamental reasons for negativity in the near term. One is slower growth in China, whose economy is rebalancing towards a more consumption-driven engine. This has had knock-on effects on raw material suppliers such as Indonesia, for example.
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Columns
Singapore offices await a new wave of tenants
Climate philanthropy key to South-east Asia’s green transition
Without a game changer, Sentosa Cove condos will continue underperforming
Social media is fragmenting further. Is that really such a bad thing?
Relative measures can be absolutely wrong
If the US economy is robust, why is the yield curve still inverted?