In the mind of many investors, frontier markets are a black box of uncertainty, characterised by unstable leadership, volatile currency, and questionable corporate governance. However, broad investor aversion has created some of the most compelling bottom-up investment opportunities of any asset class.
Coco Feng via Caixin | The U.S., Australia, India and Japan are discussing formation of a joint regional infrastructure-building initiative, attempting to counter similar Beijing-led efforts aimed at boosting developing market economies, according to an Australian media report.
The collapse in the “greed index”, the exchange traded note XIV that was an inverse of the VIX, was behind the speed and magnitude of the drawdown in equities over last weeks, but was simply amplifying an existing fragility that has grown out of the post GFC obsession with low volatility. This is just “market mechanics”, as explained by Mark Tinker Chief Economist at AXA IM Framlington Equities Asia in one of his last notes.
After twenty years of similarity between 10-year rates in the US and Germany, for the last six years there has been a growing decoupling of the US rate, reaching a spread of 2%. So what are the macroeconomic differences justifying such behaviour? Germany’s huge savings play a big part.
After thirty years, with the MSCI emerging markets at a historical high, having outperformed developed markets for the past two years. What should we expect going forward ?
After US inflation beat estimates in January, it’s likely the market will end up putting even more emphasis on the possibility of seeing inflation rates higher-than-expected months ago, or even stagflation. And, unfortunately, this will continue to spark potential over-reactions which would give way to strong, quick movements.
Atul Singh and Manu Sharma | The Indian government’s latest budget courts the poor with an indigenous brand of socialism that relies on financial transfers and private provision of services in an election year.
Scott Morris via Caixin | Overshadowed by China’s role as the world’s creditor is the uncomfortable reality that it also continues to be one of the largest recipients of multilateral assistance through major development agencies like the World Bank and Asian Development Bank. This juxtaposition of China as lender and borrower has marked a long simmering tension with the West.
Benjamin Cole | The last filmy slips of fabric have been stripped away, and macroeconomists must now view the once-romanced US Congress in flagrante delicto with a real paramour: Mr. Big Bucks Deficits. From here, a premise of Federal Reserve monetary policy must be that it takes place alongside $1 trillion annual deficits.
After several sluggish years by their own standards, the emerging economies’ growth rates have once again started to speed up. As seen by Caixabank’s strategists, “the first hesitant signs of this turnaround could be seen in 2016, becoming much more evident in 2017. Emerging growth rates are now expected to consolidate at around 5% over the next few years.”