Macroscope | Why emerging markets will continue to feel the pain, even though they are not in crisis mode yet
Nicholas Spiro says while emerging market stocks have taken a beating, bonds have been fairly resilient. Investors waiting for bond prices to drop, however, will put strains on developing economies that could spread to the US
For a few days last week, the fierce sell-off in emerging markets appeared to be easing a tad. Yet by the end of this week, the strain on the asset class was showing no sign of letting up.
According to a report by JPMorgan published last Friday, the MSCI Emerging Markets Index, the benchmark equity gauge for developing economies that is down 21 per cent from its peak in late January, is pricing in a “material slowdown” in global growth from the current rate of roughly 3.5 per cent to 2.5 per cent, revealing the extent of the bearishness in emerging market stocks.
The severity and protraction of the sell-off has sparked a debate among international investors over whether emerging markets present a compelling buying opportunity.
