Despite all the doom and gloom surrounding capital-hungry Fragile Five countries, real money managers have not abandoned the ship at all.
A mixed bag this week on emerging policy and one that shows the growing divergence between dovish central Europe and an increasingly hawkish (with some exceptions) Latin America.
The big easing continues. A major surprise today from the Bank of Thailand, which cut interest rates by 25 basis points to 2.75 percent. After repeated indications from Governor Prasarn Trairatvorakul that policy would stay unchanged for now, few had expected the bank to deliver its first rate cut since January. But given the decision was not unanimous, it appears that Prasarn was overruled. As in South Korea last week, the need to boost domestic demand dictated the BoT’s decision. The Thai central bank noted:
It’s a hard slog sometimes looking for new and surprising sources of global economic growth that have not already be heavily discounted by global investors, especially in the uncertain world of 2012. It’s been as hard of late to find new arguments to invest in China and quite a few people suggesting the opposite.
Bonds issued in emerging market currencies have been red-hot favourites with investors this year, garnering returns of 8.3 percent so far in 2012. But for some the happy days are drawing to a close — U.S. Treasury yields are nudging higher as the U.S. recovery gains a foothold and the Fed holds back from more money printing for now at least. That could spell trouble for emerging markets across the board (here’s something I wrote on this subject recently) but, according to JP Morgan, it is Asian bond markets that may bear the brunt.
Robust growth from the emerging market basket in January was always going to be tough to beat, but research from February’s gains show just how strong these markets are performing against developed ones, and not just from the traditional BRICs either, research from S&P Indices shows.