In This Week’s Issue…

by Alexander Kalis | Managing Partner & Head of Investments at Milltrust International 

EM Melt down?, MSCI EM’s Latest Addition, India & Brazil on Notice, & S-E Asian Risks.

Emerging Markets Melt down?

For several weeks, money has poured out of developing nations and into the US, causing the dollar to rise in value and the currencies of emerging markets to hit new lows. Turkey has been at the center of the rout, but many other countries, including Argentina, Hungary and Indonesia, have been hit as investors dump riskier stocks and bonds for the safety of US assets. For some economists, it raises the specter of the late 1990s-era Asian economic crisis. What’s going on?

Nevertheless, brave investors should be looking at emerging markets according to some analysts, when asked how trade tensions and political instability are impacting the region.

China A Shares Make Entry to MSCI EM Benchmark

Close to 230 China A shares debuted on index provider MSCI’s emerging markets benchmarkon Friday, a move investors expect will attract billions of dollars in inflows to the mainland market. The partial inclusion of the A shares — yuan-denominated stocks traded on the mainland — to MSCI’s Emerging Markets Index takes place in two phases, with the second step only coming in August.

India & Brazil on Notice

MSCI are placing emerging markets including India and Brazil on notice for limiting investor access resulting in possible weight caps of India and Brazil markets on MSCI Indexes. Countries like Turkey, South Korea, India and Brazil restrict use of local data in derivatives created by offshore exchanges and India also has a lengthy and burdensome mandatory registration process for foreign investors.

Risks expand for debt-heavy Southeast Asian markets

The pressure on emerging markets in Southeast Asia is set to increase as the strengthening dollar aggravates concerns about debt in the region. Among the most vulnerable are the Philippines and Indonesia, which have the highest proportions of foreign debt in the group, and, to a lesser extent, Malaysia, where a sudden change in government has given foreign funds another reason to exit their investments in the country.


Key charts you should look at

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