Global emerging markets equity funds have cut average weightings to Brazil and South Africa for the fourth straight quarter, according to the latest allocations data from fund research firm Lipper.
Should South Africa’s central bank — the SARB – strike first with an interest rate hike before being forced into it? Gill Marcus and her team started their two-day policy meeting today and no doubt have been keeping an eye on happenings in Turkey, a place where a pre-emptive rate hike (instead of blowing billions of dollars in reserves) might have saved the day.
For an investor in emerging equities the best strategy in recent years has been to take a contrarian stance, says John-Paul Smith at Deutsche Bank.
Of all the emerging currency and bond markets that are feeling the heat from the dollar’s rise, none is suffering more than South Africa. A series of horrific economic data prints at home, the prospect of more labour unrest and the slump in metals prices are making this a perfect storm for the country’s financial markets.
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.