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Alternative Market Briefing

2009 outlook (7) – Opposing views on the fate of emerging markets: economists vs. Ashmore

Wednesday, January 14, 2009

By Benedicte Gravrand, Opalesque London. See yesterday’s 2009 outlook (5) here.

Economists see collapse of emerging markets

A problem with hedge funds is that some of them, according to Saxo Bank’s estimates, are partly correlated to the stock markets and to emerging markets. Chief economist David Karsbøl believes that most hedge funds have not brought their exposure to emerging markets down enough. “This is going to hit them,” he said.

Saxo Bank has very bearish views on E.M. economies which are not expected to recover before the Western economies. “Especially Eastern Europe, which is way too dependent on foreign capital,” he added.

Indeed Strauss-Kahn recently declared the IMF needed an additional $150bln to help emerging economies. “Just to keep Eastern Europe going in the first part of the year,” Karsbøl specified. “And I very much concur.” (See Outlook (4) for more on Eastern European economies.)

The same goes for areas which are export-oriented such as South-East Asian economies. Taiwan’s, South Korea’s and China’s exports have plunged in 2008. And those economies have no plan B, says Karsbøl. The Chinese are now sitting on a huge pile of U.S. debt and they have no plan as to who to produce for, as they have no domestic consumptio......................

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