In­vestor Jit­ters Likely to Dent EM Per­for­mance

The Economic Times - - Companies: Pursuit Of Profit - Ashutosh.Shyam@ times­group.com

ET In­tel­li­gence group: Grow­ing riskaver­sion among global in­vestors and the hunt for a safe haven, ow­ing to mount­ing ten­sions be­tween North Korea and the United States, could hurt emerg­ing mar­kets’ per­for­mance in the near-term. For in­vestors, the pri­mary con­cern now seems to be risk-man­age­ment; ev­ery­thing else is sec­ondary.

In the event of panic sell­ing, the im­pact on emerg­ing mar­kets could be harder given that they were out­per­form­ers in 2017 un­til re­cently and the bid-ask spreads are wider. Be­ing a vi­tal cog in the emerg­ing world, the In­dian eq­uity mar­ket may have to bear the brunt of any up­heaval in global mar­kets. The MSCI EM In­dex — a bench­mark for emerg­ing mar­ket in­vest­ment — out­per­formed the de­vel­oped mar­ket in­dex by the widest mar­gin so far in 2017 since 1993 as global fund man­agers in­creased al­lo­ca­tion to risky as­sets and most of the de­vel­oped world cen­tral banks came out with ac­com­moda­tive in­ter­est rate guid­ance. The sud­den risk aver­sion of fund man­agers can be gauged from the fact that nearly $1 tril­lion of global mar­ket cap, equiv­a­lent to half of In­dia’s to­tal mar­ket value, was wiped off in just two days of sell­off. Be­sides, the sell­off has also sparked an un­prece­dented rush for pro­tec­tion in the op­tions mar­ket.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.