Emerging markets less affected by GFC than past crises
Emerging markets will not be as dramatically affected by the global financial crisis as they have been by economic crises in the past for three reasons, according to a recent report byStandard & Poor’s Fund Services.
The report stated that while the enthusiasm investors have had for emerging markets has been tempered in the past as a result of crises such as the 1990s Asian economic crisis, the global financial crisis has been less damaging to emerging markets.
“One of the lessons learned during the Asian crisis is that emerging economies need to have a material degree of independence from unpredictable international capital flows,” S&P Fund Services analyst Leanne Fook said.
“Today, it is the emerging economies that are providing capital and savings to the developed world, particularly the US.”
She said the second reason is the emergence of three billion new capitalists, which means a self-sustaining structural growth dynamic has been established in emerging economies.
“Increasingly, the substitute for the US consumer looks likely to be internal demand or another emerging economy,” Fook said.
She said the third reason is that the GFC, unlike other crises that have affected emerging markets, has its roots firmly in the developed world.
“That makes a world of difference,” she said.
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
