LONDON, Aug 20 (Reuters) – Emerging stocks fell 1.5 percent
on Tuesday, currencies tumbled to yet more lows and bond yield
spreads blew out to their highest in five weeks in the wake of
U.S. Treasury yields’ surge to two-year highs.
Emerging assets will get little respite ahead of the
Wednesday release of Federal Reserve minutes, which could
indicate whether the U.S. central bank is indeed on track to
start paring back its money-printing from next month.
In the selloff gripping emerging markets, one currency is conspicuous by its absence — the Turkish lira. But this will change unless the central bank adds significantly to its successful lira-defensive measures.
Hopefully at today’s policy meeting.
Like India or Indonesia which have borne the brunt of the recent rout, Turkey has a large current account deficit, equating to over 5 percent of its economic output. But what has made the difference for the lira is the contrast between the Turkish central bank’s decisive policy tightening moves and the ham-fisted tactics employed by India and Brazil. (We wrote here about this). See the following graphic (from Citi) that shows the central bank has effectively raised the effective cost of funding by 200 basis points to around 6.5 percent since its July 23 meeting.
MUMBAI/LONDON, Aug 19 (Reuters) – The Indian rupee crashed
to a new record low against the dollar on Monday, leading a rout
in the emerging market currencies that investors perceive as
being most vulnerable to an exodus of foreign capital.
A fierce selloff in many emerging currencies shows no sign
of abating as the expected withdrawal of U.S. monetary stimulus
prompts investors to shun markets burdened by funding deficits,
slowing economies and inflation.
The frontier markets juggernaut continues. Here’s a great graphic from Bank of America/Merrill Lynch showing the diverging fund flow dynamic into frontier and emerging equity markets.
What it shows, according to BofA/ML is:
Frontier market funds with year-to-date inflows of $1.5 billion have decoupled from emerging markets ($2.1 billion outflows year-to-date)
LONDON (Reuters) – South Africa’s rand fell 0.8 percent on Monday, joining the rupee and rupiah in their tumble against the dollar, while emerging equities lost 1 percent as U.S Treasury yields rose to new two-year highs.
The fierce selloff that has hit some emerging assets shows no sign of abating because the market is increasingly convinced that the U.S. Federal Reserve will start reducing its stimulus programme from next month. Developing countries with big funding deficits are taking the most heat.
LONDON (Reuters) – If the popping of the dot-com bubble in 2000 spelled the demise of growth-at-any price investment strategies in the West, 2013 may be the year for this to happen in emerging markets.
Emerging market investors, just like their dot-com predecessors of the 1990s, are learning the hard way the risks of paying higher and higher prices for assets in the hope that turbo-charged future growth will deliver the payoff.
LONDON, Aug 18 (Reuters) – If the popping of the dot-com
bubble in 2000 spelled the demise of growth-at-any price
investment strategies in the West, 2013 may be the year for this
to happen in emerging markets.
Emerging market investors, just like their dot-com
predecessors of the 1990s, are learning the hard way the risks
of paying higher and higher prices for assets in the hope that
turbo-charged future growth will deliver the payoff.
It’s difficult to find many investors who are enthusiastic about Russia these days. Yet it may be one of the few emerging markets that is relatively safe from the effects of “sudden stops” in foreign investment flows.
Russia’s few fans always point to its cheap valuations –and these days Russian shares, on a price-book basis, are trading an astonishing 52 percent below their own 10-year history, Deutsche Bank data shows. Deutsche is sticking to its underweight recommendation on Russia but notes that Russia has:
LONDON, Aug 6 (Reuters) – Trade in emerging debt,
particularly corporate debt, is being hampered during times of
stress by bank regulation that has cut the number of market
counterparties, sapping liquidity, a senior fund manager says.
John Morton, head of emerging debt at BNP Paribas Investment
Partners, said banks’ shrinking proprietary trading desks were
struggling to cope with the needs of an expanding asset
LONDON (Reuters) – If the Reserve Bank of India wants some pointers on how to lift the rupee decisively off record lows, it could try asking Turkish central bank governor Erdem Basci.
The rupee tumbled to a new record low against the dollar on Tuesday, raising the stakes for the RBI, whose stop-start currency defence strategy is widely seen as inadequate.