Report: Crisis of emerging markets in the third and final stage

February 18, 2014 13:51
 



Said sixty Jacobsen, chief investment officer and chief economist for Saxo Bank, said that initially negative for this year was a surprise to most investors, because we have entered the new year expectations usual stock market the close of trading in 2014, a high rate of up between 10-15% with a sustained recovery in Europe and the United States , and January, but soon became just spins around potential crisis for emerging markets, which ended up damaging even the proceeds of the developed markets in the first month of this year.

The question now is to what extent the threat seems real crisis emerging markets? I think it's true - the world is going through the experience of rebalancing global as the secondary outcome is a decline in growth at the global level with a contraction in developed markets and weakness in emerging market currencies, because the weapon of foreign exchange is seen as the only real option for economies which despaired of maintain growth in export.

This creates a flow of capital away from emerging markets and equity investor with a re-discovery of the safe haven of bonds.

There is a significant slowdown and structural League happening in the world now: the fascia which is almost alone bore of the global economy during the 2008-2012 crisis began to slow down now proactively, China, which accounted for 36% of global growth in 2012, are now seeking to reduce the economy shade and fight corruption and re-capitalization of banks to secure a soft landing with a slowdown in the expansion of credit operations.

As for the rest of Asia, which represents 24% of global growth are now suffering from a deficit intends to fight it.

During the year 2013 saw many of these countries, especially the five countries fragile (South Africa, India, Indonesia, Turkey and Brazil) their currencies fall dramatically because their financing needs, which remains stable until now has moved to a large deficit, making it more dependent on foreign investors and global monetary policy.

And moved Brazil, Russia, India and China from a surplus of 5% of GDP before the crisis to develop a barely balanced as that among this group of countries were China is the only exception has been retained surplus.

What is the important thing you should know about investing in emerging markets in this regard: when you buy a portfolio of bonds in emerging markets such as the index of local markets emerging, the 100% of your revenue comes from foreign currency stronger, and likewise you if you bought emerging market equities, 70 % of your revenue to be re-evaluated again from foreign exchange.

Now become emerging market countries are looking for other currencies weaker or less price, which means that the incentive for investors to buy and finance the emerging markets has disappeared.

Why buy a portfolio of emerging markets, while the declared absence of 100% of the shares and 70% of the bonds by governments, central banks concerned its accounts current and growth? In other words, short-term policy to reduce the value of Amlatk to create increased competition have been destroyed, which makes us the real reason we investors are investing in emerging markets.

I started cycle is commendable.

This is precisely the reason why the emerging markets crisis does not end. If the goal is to get the flow to emerging markets, the government needs to stop weakening their currencies and strive to reform and stabilize their currencies, but instead we got a race to the abyss between these machines export.

The problem in general is that we can not all resort to export the surplus at the same time in which someone who wishes to import.

Emerging market countries have moved from agricultural economies to export machines mainly characterized by lower wages and capacity, and the growth of the economies of these countries have become large middle class want better products and often more expensive than those previously imported.



This process is the movement of the balance of trade deficit to the stage, and after a few years the need arises to enter foreign investors to fill the gap between growing consumption in emerging markets and export.

The problem - of course - is that what would really help these economies and the reform program is to reduce dependence on exports.

 This will happen soon, not least because many of these countries have elections in 2014.

Election year means that there will be no new policy reforms designed to expand the expectations of the voters, which means in many cases, energy and foodstuffs supported in emerging market countries, and this does not fit the imbalances on the contrary aggravated.

Finally, we need to accept this crisis in emerging markets, we are in the final phase of the re-balancing of this crisis; On the one hand shows that emerging market countries less competitive and the need to restore balance to their economies, but on the other hand, it means that someone else beneficiary ( mathematical data current is zero at the global level).

This person is the United States and Europe.

In the United States shall be done through a very low cost in energy compared to the rest of the world (fuel oil shale has made half the price of natural gas in Europe) and the Europe Through the demand for low-wage and soon deflation lowers prices.

The world is simply more balanced than it was before the crisis, even if the recovery came true, it would be an exit point, namely balance, less borrowing and more transparent, and this is excellent news for the next decade after the end of this crisis actually.

This phase comes after the recent housing crisis, banks in America (2008 - 2010) and the European debt crisis (2010-2012).

Asia carried the world on her shoulders so far during this crisis, so that when the world has slowed, Asia continued to maintain a very high investment rates.

Now these same levels of investment you need to adjust down to a decline in growth in Asia, the price is slowing down all of our economies with the face of low inflation.

Emerging market countries need time to re-balance and get to the point where it is based official for real change.

Means to address the early signs of foreign exchange we are close but we're not there yet.

Learn your markets and emerging currencies where we are at the end of 2014 - in terms of return on conservative - may be really more dependent on the value of the dollar compared to the Turkish lira and the U.S. dollar compared to the rupee Indonesian and the U.S. dollar compared to the Indian rupee and the U.S. dollar compared pesos Mexican instead of alleles and the Federal Reserve.

 To me this is a good thing.


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