A glimpse at emerging market stress

As opposed to prevailing conditions in 2017, emerging markets have seen tremendous headwinds in 2018. In a recent Glacier Funds On Friday, the author briefly examined and provided a perspective on the factors underpinning the depressed return environment in emerging markets.

Bongani Mzimeli, Investment Analyst at Prowess Investment Managers, says that according to the investment research firm MSCI, the Emerging Markets Index, which tracks large and mid-cap stocks in 24 countries, has fallen by more than 20% from its peak in January 2018.

A cocktail of potential problems is confronting the world’s emerging economies, with many of them facing challenges including a global economic slowdown, rising interest rates, trade protectionism and geopolitical tensions. We’ve seen the emergence of credit stress for nations with macroeconomic imbalances or rising political risk – particularly those highly reliant on international financing.

Many market pundits point towards trade wars being the reason for the declines in the emerging market space but Glacier contends that headwinds are likely the result of a readjustment to contracting global liquidity, a stronger US dollar and rising US interest rates, as well as a slowing global economy.

Click here for the full Funds On Friday document to find out what else Bongani has to say.