EVENTS in four emerging market countries demonstrate the remarkable volatility of investments in the sector and also give a tantalising glimpse of excitement yet to come.
Dudley Howard, managing director of Guinness Flight Asia, said that since the 'Tequila Crisis' in Mexico which hammered emerging market funds throughout the world and especially in Latin America, Mexico and Argentina had staged remarkable recoveries.
'Argentina and Mexico fell 70 per cent after the Mexican crisis. Mexico is now up 70 per cent, but that's from a lower base so it is not yet back to where it was; but it's recovering.' He said that after the collapse of the Mexican economy, the situation was exacerbated by the New York hedge fund mentality, which deepened the implications of the crisis.
'The austerity package came on March 9 and there has been a substantial rally since then. What Mexico has done is to put all its efforts into export improvements.
'The savings of the nation have been knocked out and so you can't expect a domestic recovery. Now they are doing so well that they're driving up foreign exchange earnings enormously and that's having a beneficial effect on recovery.' Argentina had seen the same rise as Mexico 'but we're not as keen on Argentina because we think there have to be more reforms . . . they have to build up their industries', Mr Howard said.
'What we do like is Brazil; that's the best Latin American market since the crisis led by Mexico. It was up nine per cent in August when all the other markets were falling and what's happening is that, despite the enormous vested interests in Brazil, unlike Argentina, it looks like the new government is tackling its problems successfully.