Photo: D’Arcy Norman via flickr
With the Greek debt situation unresolved and getting worse, and a slowdown in the U.S. economic recovery, emerging markets have seen investors pulling out as they attempt to reduce how wirks their investments are, according to Societe Generale analyst Benoit Anne.With high inflation across Asian giants and continuous rate hikes investors have a lot to be worried about, and are moving out of emerging markets and into to safer investments.
From Benoit Anne:
The Greek debt crisis has worsened dramatically even though the IMF now seems set to agree on the disbursement of the new tranche. The difficulty with this is that the issue is no longer about IMF conditionality but about the Greek political climate, which makes the crisis resolution all the more uncertain. Meanwhile, the concerns about the downside risks to global growth continue to rise, with further evidence that the US economic activity is slowing sharply. Against this backdrop, EM assets have sold off aggressively and EM investors have switched to risk reduction mode. Whatever short or long positions are therefore being squared. That means that the big receiving positions in EM rates–which have been our favourite trades–are being closed.
Anne expects emerging market investors to wait-and-watch for the moment while global risk conditions normalize.
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