I just got back from a week in the islands and tried to escape the chorus of emerging market bears. It’s been a nasty week and emerging markets has been near the top of the loser board, but the reach of journalists and voices of marginal observers of emerging markets found its way to me on a quiet beach in the Caribbean.
…but most didn’t really see this coming despite all the historical references. So while the U.S. is +3.2% in May going into the last day of the month, and Germany is +4.5% (in USD terms), emerging market equities have been torched with much of that move coming from the FOREX.
Commodity currencies: How can they withstand the deflation that spot prices in core commodities are enduring?
The rich get richer and the poor get poorer. I’m not sure not sure you can expect this to change anytime soon. Fund flows into EM last week broke a three week downtrend with new inflows.
The South African rand is now at 45-month lows with a hard sharp move in ZAR in the last hour, which is now -1.25%. Local bonds are being sold off hard.
The hottest sector for three years in South Africa — retail — has been taken out and beaten in 2013. Beaten hard! We highlight this because it is worth doing some work and making a call as the market has had a large move.
Emerging markets have been one the best places for market participants to find investment opportunities in equities, especially in the retail and banking sectors. In particular in South Africa (EZA, quote), firms in these industries have historically been bullet proof; however, recently, shares in these firms have been adversely affected by social unrest in the country.