Antoine van Agtmael, chairman and co-CIO Ashmore EMM, part of the $65-billion funds group, is to 'emerging markets' what Jim 'O Neil of Goldman Sachsis for BRIC. Agtmael, author of The Emerging Markets Century, argues in a column that though financial markets will bounce back, India may lag.
Volatility is back, emerging markets just had their worst quarter in a long time, and the fear of another global economic and financial crisis has crept back again into investors' minds. The outlook for Europe looks grim, for the United States dim, and for Japan clouded.
The uptrend in currencies has temporarily stopped in several countries. Obviously, there are good reasons for concerns. Investors are hasty but not always efficient discounters of news flow and unexpected risks. News commentators talk again of "submerging" markets. Of course, they have done it before and have had to eat their words.
Markets typically over-react to good as well as bad news - emerging markets even more so. The best opportunities are often when the outlook is bleak, investors are fearful, markets have sold off and valuations have tumbled - like right now. A resolution in Europe, especially if it comes with signs of even a modest job growth in the United States, may well lead to a major bounce from the current depressed levels, led by emerging markets just as they did after the 2008 crisis.
Even after 20-25 years of investing in emerging markets, global investors' "prejudice" is only slowly dissolving. As was the case in 2008, the crisis emanated in the developed world. Most of the problems emerging markets face are, in fact, collateral damage. Whatever problems there are in emerging economies - slightly higher inflation, slowing growth, and higher non-performing loans following an earlier credit bubble in China and Brazil - are very manageable and not alarming. Investors are still caught in a 20th rather than a 21st-century perspective.
But emerging markets are not an island. They are inextricably linked to the global economy and financial system. Job growth in the US has disappointed, an earthquake in Japan created havoc in the global supply chain and, most importantly, Europe's banks and the euro itself are suffering from the fall-out of a potential Greek default and its impact on Spain and Italy.
Half-measures have not calmed fears. Not one central authority but a large group of European governments have to make it unambivalently clear that they stand behind the major banks and the euro and they will not allow them to disintegrate.
That takes time and markets are impatient. Nobody knows for sure, but it is far more likely than not that Europe, after its period of procrastination is coming to an end, will step up to the plate and limit the contagion. The real question is whether they will do so in time, before markets unravel further and cause a disorderly default, a major bank failure or broader sovereign debt issues. It is in the clear interest of the European authorities to avoid such a life-threatening crisis.
Name- Deepak kumar jha
Pgdm(2010-12) 3rd sem
Volatility is back, emerging markets just had their worst quarter in a long time, and the fear of another global economic and financial crisis has crept back again into investors' minds. The outlook for Europe looks grim, for the United States dim, and for Japan clouded.
The uptrend in currencies has temporarily stopped in several countries. Obviously, there are good reasons for concerns. Investors are hasty but not always efficient discounters of news flow and unexpected risks. News commentators talk again of "submerging" markets. Of course, they have done it before and have had to eat their words.
Markets typically over-react to good as well as bad news - emerging markets even more so. The best opportunities are often when the outlook is bleak, investors are fearful, markets have sold off and valuations have tumbled - like right now. A resolution in Europe, especially if it comes with signs of even a modest job growth in the United States, may well lead to a major bounce from the current depressed levels, led by emerging markets just as they did after the 2008 crisis.
Even after 20-25 years of investing in emerging markets, global investors' "prejudice" is only slowly dissolving. As was the case in 2008, the crisis emanated in the developed world. Most of the problems emerging markets face are, in fact, collateral damage. Whatever problems there are in emerging economies - slightly higher inflation, slowing growth, and higher non-performing loans following an earlier credit bubble in China and Brazil - are very manageable and not alarming. Investors are still caught in a 20th rather than a 21st-century perspective.
But emerging markets are not an island. They are inextricably linked to the global economy and financial system. Job growth in the US has disappointed, an earthquake in Japan created havoc in the global supply chain and, most importantly, Europe's banks and the euro itself are suffering from the fall-out of a potential Greek default and its impact on Spain and Italy.
Half-measures have not calmed fears. Not one central authority but a large group of European governments have to make it unambivalently clear that they stand behind the major banks and the euro and they will not allow them to disintegrate.
That takes time and markets are impatient. Nobody knows for sure, but it is far more likely than not that Europe, after its period of procrastination is coming to an end, will step up to the plate and limit the contagion. The real question is whether they will do so in time, before markets unravel further and cause a disorderly default, a major bank failure or broader sovereign debt issues. It is in the clear interest of the European authorities to avoid such a life-threatening crisis.
Name- Deepak kumar jha
Pgdm(2010-12) 3rd sem
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