Market Review: Developing Markets

The New Year began where the old one had left off. Markets rose by around 4%, but were then overcome by a set of worries that shaved 10% off that peak level, leaving the MSCI EM index, down 5.6% in January. There was considerable disparity between regions, with the largest decline registered in Latin America (down 9%), where Brazil took an 11% tumble. Asia fell too (down 6%), with the largest decline seen in Shanghai, which fell 10%, while the EMEA region gained a modest 1%.

The declines lie partly at the feet of the more somber tone in world markets generally, as investors begin to fret about the level of debt build-up in the public sectors of the developed world. They also reflect the start of monetary tightening in a number of overheating Asian economies. It did not help that valuations had reached levels that were last seen in the boom times, leaving little room for disappointment.

Much has been written elsewhere about the level of government debt associated with actions aimed at averting financial meltdown, but this month markets had to digest the spectacle of Greece quickly heading for the rocks. While this particular case might be small in the global context, it has unsettling implications for the Euro, and has forced investors to face the prospect that a deleveraging cycle across the developed world may not be positive for equity markets. At the same time, reports of rapid growth in China have led to pronouncements that the rate of growth in bank lending must slow down, amidst evidence that the monetary cycle has turned to tightening. India too has raised rates. All this underlines the differences between the prospects of emerging countries and those elsewhere.

Permanent Address: http://zephyrmanagement.com/reviews/latin-america/

Back to Zephyr home

© 2007 Zephyr Management, L.P. 320 Park Avenue, New York, New York 10022 USA

Legal disclosure | Privacy notice

• Contact us
• Home
• Back to top