Despite central banks keeping interest rates at the lowest levels in history and buying debt like there’s no tomorrow, the mountain of debt is not getting any smaller. Emerging markets are, as usual, the place where people are looking for the first signs of trouble.
While all eyes are still on Turkey, another emerging market is about to show the ugly side of quantitative tightening, and this time things could get really serious.
The world’s second largest economy has been a “success story” for so long that people have forgotten about China’s many vulnerabilities. Or rather, the Chinese communist party has been so good at keeping things under wraps, that few of the country’s weaknesses are known to the outside world.
Last week was a feast of records for Wall Street: the S&P 500 recorded six consecutive highs, something not seen for two decades. The streak only ended after a jobs report that showed the first negative reading in seven years, skewed by the hurricanes that hit the U.S. in September.
By Sourajit Aiyer
This article is a synopsis of my new book, Capital Market Integration in South Asia: Realizing the SAARC Opportunity. Here is a link to the publishers’ website and here is a link to it on Amazon, where you will be able to buy it when it is launched in November.
Lee Kuan Yew, credited for converting Singapore into an economic success, once described ASEAN as “Unpromising Start, Promising Future”. This phrase can also describe the South Asian Association for Regional Cooperation (SAARC), which has seen few successes as geopolitics slowed progress.
Hedge funds have turned bearish on emerging markets on a medium-term outlook, a recent survey of investors showed.
Emerging market assets, particularly bonds but also equities, are staging a comeback as investors gradually return to risky assets.
A survey of investor sentiment carried out by Societe Generale in February among 41 hedge funds and 41 real money investors such as pension funds, showed the bullish bias towards emerging markets strengthening for the near term.
Money has been rushing into risky assets shortly before the European Central Bank starts its quantitative easing program, data from the latest capital flows surveys showed.