Last week was the anniversary of the announcement made by Bernanke which sent shockwaves through financial markets. His statement that the US monetary stimulus could not continue indefinitely was a message no one wanted to hear. (…)
Hardest hit were emerging markets as investors decided that less monetary stimulus would lead to a return to the US of a wall of money but riskier returns in the developing world.
The countries most vulnerable to this change in sentiment were those that had allowed themselves to become dependent on inward investment such as India, Indonesia, Turkey, Brazil and South Africa.
Though according to Tom Stevenson from Fidelity Worldwide Investments not all emerging markets performed badly. The analysis of India, Thailand and Dubai show that for different reasons but you can still get good returns on your investments as the dividend yields are higher as a compensation for the added risks of investing in those markets.
James Barrineau, Co-head of emerging-markets debt relative for Schroder Investment Management North America says that “emerging markets is linked to interest-rate risk rather than emerging-markets risk, as most of the indexes are investment-grade securities that trade with high correlation to U.S. Treasuries. Investors should be thinking about emerging markets with a very sharp focus on duration. The way to manage duration is to access the entire opportunity set, not just the most liquid part of emerging markets — sovereign debt, which has the highest correlation to U.S. Treasuries.”
Emerging-markets assets are clearly rebounding. Investors who understand how this asset class has managed a successful turnaround will be the ones best-positioned to spot the best opportunities.
If you are interested in learning about Investing in Emerging Markets, attend a practical 2-day course in London conducted by an experienced practitioner and emerging markets specialist, Michael Preiss.
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