Daily Management Review

Emerging equity markets are bleeding


06/18/2018


Tightening of the Fed’s monetary policy and the trade confrontation between the US and other countries resulted in a sharp decline in demand for assets in emerging markets. According to the EPFR, investors have withdrawn from the funds of developing countries $ 1.3 billion over the past week, and for four weeks - almost $ 4 billion.



pxhere
pxhere
The latest Emerging Portfolio Fund Research (EPFR) data show a decrease in the interest of international investors in the assets of developing countries. According to an estimate based on the BofA Merrill Lynch Global Research report (taking into account the EPFR data), by the end of the week ended June 13, emerging-market funds lost more than $ 1.3 billion. A week earlier, the clients withdrew symbolic $ 40 million from such funds. The continuous outflow of investments keeps going for the fourth consecutive week, and during this time, investors have withdrawn almost $ 4 billion. This is the worst result since the end of 2016.

The decrease in investors' interest in risky assets can be explained by tightening monetary policy of the US Federal Reserve. Last Wednesday, as most analysts expected, the open market committee of the Federal Reserve raised the base interest rate by 0.25 pp, to 1.75-2% per annum, and also raised the forecast for GDP growth this year from 2, 7% to 2.8%. In addition, the regulator decided on the number of interest rate increases before the end of the year. Eight committee members voted in favor of another two revisions, and only seven were for one.

The US trade war, which keeps involving more and more countries, also causes concern among investors. Since June 1, US President Donald Trump, after a two-month break, has introduced protective duties on imports of steel and aluminum from Europe, Canada and Mexico. The affected countries reacted by introducing reciprocal duties on American goods. Already on June 15, Donald Trump said that Washington introduced an import duty of 25% on imports from China in the amount of $ 50 billion per year. The Minister of Commerce of China, in turn, said that China will introduce symmetrical duties on American goods.

The flight of investors led to a collapse of the stock indices of developing countries. According to Bloomberg, the Brazilian stock index, which declined by 4.8% over the week, and the month by more than 18%, became an outsider. Among the developed countries, the Italian FTSE MIB index (8.7%) showed the maximum decline.

source: bloomberg.com






Science & Technology

Financial giants and US government turn to quantum computers

Long Way To Go For Coronavirus Vaccine, Say Drgumakers

Google's subsidiary launches recognition service for photoshopped images

Unapproved Drug For Coronavirus Treatment And Testing Given By Gilead Sciences

Live Facial Recognition Cameras Will Be Used By London Police

Driverless Vehicle For Its Ride-Sharing Service Unveiled By GM’s Cruise

Amazon will allow customers to pay with palms instead of cards

Complete Computer System For Self Driving Cars Launched By Qualcomm

In A Lifetime We Could Accumulate 20Kg Micro-Plastic In Our Body

Creator Of The First 'Gene-Edited' Babies Of The World Gets 3 Year Jail Term In China

World Politics

World & Politics

Ex-head of Mexican Pemex will be transferred to Madrid prison

China Releases First Detailed Study Of Coronaviurs Attack, Finds Elderly At Most Risk

EBA Finds Alarming Compliance Results For Gender Diversity Among Banks

Record high temperature observed in Antarctica

Venezuela to initiate international litigation against USA because of sanctions

Coronavirus Death Toll 204 In China, US Asks Americans Not To Go China

Hong Kong protesters block railway to mainland

Heavy rain kills 47 people in southeast Brazil