Weekly Commentary – Emerging markets were at risk
For the first half year, the main US stock markets performed strongly, but most emerging markets lag behind. In fact, emerging stock market was at risk of depression, due to 3 factors.
1. Market worry Fed tapering QE – Since Financial crisis, U.S. bond-buying program was one of the main constants to strive a recovery of global economy. Particularly, emerging markets were first group of beneficiary, as hot money has flowed from US to them. Consistently, they would be the first group of sufferer if Fed (U.S. Federal Reserve) tapered QE.
2. Yen Depreciation – Some markets rely on exportation, however, they were suddenly less competitive to Japan while Yen have depreciated 3.69% in past 1 year.
3. Slower economic growth rate of China – Countries, whose economy depends on exporting raw materials to China, were affected by poor china economic grow rate.
In conclusion, emerging markets was at risk of depression. It should be underweighted until global stock market settle down.
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