The West has just agreed to stump up a load of cash for Ukraine but there is a distinct sense of deja vu around it all.
Investors in emerging markets are facing a tough choice. Should one buy cheap shares in the hope that poor corporate governance and profitability will improve some day? Or is it better to close one’s eyes and buy into expensively valued companies that sell mobile telephones, holidays and handbags — all the things high-spending emerging market consumers hanker after?
Turkey’s elevation to investment grade last week may or may not be a game changer for its stock and bond markets, but the country is really hoping for a boost to FDI – bricks-and-mortar foreign direct investment into manufacturing or power generation. Its peace process with Kurdish separatists should help.
Global Investing has discussed in the past what a golden opportunity the Iranian crisis has proved for Turkey. Between January and July 2012 it ratcheted up gold exports to Iran ten-fold compared to 2011 as inflation-hit Iranians clamoured for the precious metal. Since August exports appear to have been routed via the UAE, possibly to circumvent U.S. sanctions on trade with Teheran.
Is there a change of sector leadership underway within emerging markets?
For years, commodities and energy delivered world-beating returns to emerging market investors. Yet in recent years there are signs of a shift, says Todd Henry, equity portfolio specialist at T.Rowe Price.
More and more emerging central banks have been embarking on the policy easing path in recent weeks. But Chile and Turkey which hold rate-setting meetings this Thursday are not expected to emulate them. Both are expected to hold interest rates steady for now.
Russian equities have had their worst week since early-December, with losses of over 6 percent. But don’t look too far for the reason — world crude futures have fallen to three-month lows around $114 a barrel on worries that U.S. and world economic growth may not be picking up after all. They too have fallen 6 percent so far this week. Check out the following graphics showing how Russian stocks and its currency move in lock-step with oil prices: