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Alternative Market Briefing

The Big Picture: Thornburg optimistic about emerging markets

Thursday, April 09, 2020

amb
Charlie Wilson
B. G., Opalesque Geneva:

There is a looming credit crisis in emerging markets as tumbling currencies and plunging commodity prices have hit countries burdened by high debts, especially in Africa and Latin America, the FT reported. Furthermore, the MSCI Emerging Markets Index was down -15% in March, -23% YTD. It may eventually match 2008's -53% level.

The COVID-19 shock has also caused a pronounced sudden stop in capital flows to emerging markets. The Institute of International Finance (IIF)'s tracking of non-resident portfolio flows shows that EM experienced the largest outflow on record in 2020-Q1. "While we expect a recovery of flows in the second half of 2020, we do not believe that the pickup will be strong enough to bring about a return to 2019 levels. The recovery in flows will most likely follow that of economic activity, with EM Asia leading the way, and Latin America and frontier markets remaining subdued the longest."

Emerging markets hedge funds have also been hurt in the Covid-19 sell-off. The Eurekahedge Emerging Markets Hedg......................

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