Besides the immense human tragedy that it has caused, Russia’s brutal attack on Ukraine has also thrown emerging markets back at least a decade in terms of attractivity for investors. It will be hard, if not impossible, for the asset class to bounce back.Continue reading
As more politicians become aware of the need to do something about climate change before we’re all swallowed by the oceans we came from, discussions are focusing on how to measure what countries are doing about it and what steps to take to contain it.
An accounting trick that could save the planet should perhaps be given more attention: adjusting each country’s gross domestic product data by the effect that particular country has on climate change.Continue reading
Emerging market assets have enjoyed robust performance despite the Covid-19 pandemic, with investors attracted by their higher yields and faster economic growth prospects in these countries.
But three headwinds could cut short their growth spurt: rising interest rates, environmental, social and governance (ESG) issues and the retreat of globalisation.
These headwinds are converging at a very delicate time for global markets, and at least two of them could persist for a long time.Continue reading
One of the most widely accepted “truths” about ESG (environmental, social and governance) investing is that young investors are very keen to put their money into companies that show strong ESG credentials.
Entire marketing strategies have been built around this idea. But what if, in fact, this “truth” turns out to be no more than myth?Continue reading
With news of another Covid-19 vaccine on its way and optimism rising ahead of the end-year holidays, it looks like 2021 will shape up to be much better than 2020.
But one forgotten danger could spoil the party: inflation. Price rises are far from investors’ minds, but an ‘inflation tantrum’ could have devastating effects on various countries’ economies if they are not kept in check.
Among developed countries investors, there are various interpretations of the strength of the commitment to environmental, social and governance (ESG) factors in emerging markets, ranging from the cynical to the idealistic.
The cynical view would be that there can be no “real” ESG in emerging markets because too often they are plagued by corruption, therefore investors cannot trust what companies in these countries report.
The idealistic view, on the other hand, would see every little step towards introducing ESG as a wonderful sign that these countries are finally deciding to adopt the same values as Western democracies.
While both extremes are wrong, sadly even the moderate take misses the main difference between emerging markets and developed ones: the effect of development itself on ESG — and in particular on the “E”.
Just as it was beginning to look like the bond market’s luck was finally running out, President Trump made some remarks that all but guarantee that the bond rally will go on for a little while longer.
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.
This past week, there has been a frenzy of selling of emerging markets assets. The outflows from both stocks and debt in emerging markets reached their highest level since December 2016.
This amounted to $3.7 billion withdrawn from emerging market equities and bonds, according to data analysed by Bank of America Merrill Lynch. These outflows have helped push our old friend, the Bull/Bear indicator developed by BofA Merrill Lynch, to 4.8 — its lowest level since January 2017.
Investors’ optimism remained at very high levels, despite the beginning of tapering of quantitative easing by the European Central Bank (ECB), tensions with North Korea and the Catalan crisis.