Emerging Markets: Stick To Countries With Current Account Surpluses

Investors have quit emerging markets (EM) in droves in recent days following currency upheavals and a rethink on their growth prospects once central banks starting hiking interest rates to stem the rout.

“Many factors have been blamed for this latest burst of emerging market weakness – Fed tightening, rising political tensions, China credit concerns. But the most consistent concern seems to be current account deficits,” observe Citi’s Global Strategy Team in their recent research note ‘Avoid Big Deficits.’ “At times of rising market volatility, investors seek out safer assets such as cash or US treasuries. Those emerging market countries with the greatest external financing requirements have the most to lose as this fickle capital heads for the exit.”

Login required to continue reading.

Setup a free account to get access to this article (no credit card required).

View Full Article

Already a member? Log in here