EM News: Emerging Markets Prove Haven in Global Storm


By Gordon Platt

Emerging markets continue to outperform developed markets and were a relatively safe haven during the recent global equity market volatility.

Emerging market bond funds and currencies were stellar performers during the sell-off in global markets this summer.

“It is very encouraging that emerging markets equities were able to outperform developed markets during this very difficult period,” says Win Thin, global head of emerging markets strategy at Brown Brothers Harriman in New York. “Going forward, we think emerging markets can continue to outperform developed markets under our base-case scenario of further eurozone turmoil.”

Equity markets in the Philippines, Thailand and Indonesia posted gains during the period from late June through early August, while the MSCI Developed Markets Index fell 11.8% and the MSCI US Index fell 12.6%. This trend is consistent with the view that the Asian region has the best fundamentals.

“While we have been constructive on Latin America, we think that sharply lower commodity prices will end up hurting this region, despite good fundamentals,” Thin says. Emerging markets bond funds took in more than $1 billion in the week ended August 5, and those focusing on local currency debt enjoyed their best week in more than a year, according to EPFR Global, a Cambridge, Massachusetts research firm that tracks investment fund flows and asset allocation.