Many emerging markets were in recession last year and are only slowly emerging. Tight financial conditions and flat to inverted yield curves will make the recovery slow and fraught with risks. Global growth will be lower as a result.
The debate on EM economies (and equities) is heating up. Initially this week, we had the financial world equivalent of the pillory with the widely reported closing of a high profile US hedge fund’s EM fund due to heavy losses in 2013. Solemn nodding followed by EM naysayers suggesting that this is truly a sign of the death-knell of EM as an asset class. The stakes are being raised elsewhere too with the media pitting seasoned investment professionals on both sides of the fence in recent weeks.
The OECD diffusion index leads our global export index by about 6-9 months, and even if it is turning down into mid-2013, it suggests that better times are ahead for global export activity (upper chart). Indeed, we are now seeing…
South Korea is still being touted as an emerging market, but this is increasingly becoming a misnomer. The country’s demographics are now increasingly negative and the South Korean society is in the throes of a long and painful economic and demographic transition towards an export dependent economy.