Alroy Commentary - Emerging markets view blurred
Southeast Asia equities were shocked since foreign investors pulled cash. As slowing regional economic growth and conjecture that the Fed will taper bond-buying program soon, global investors have withdrawn a net $2.2 billion of Southeast Asia equities this month. In Southeast Asia, the Indonesia Jakarta Composite Index has fallen by 12% and Thai SET Index has dropped by 10% to the eight months lowest level.
In previous commentary - Thai risks economy landing, we argued fundamentals weak are the main reason of emerging market equities tumbling. Thailand’s economy entered a technical recession as export weak, Thai GDP grew 2.8% in the second quarter. GDP growth forecast was downgraded to between 3.8% and 4.3% from previous range of 4.2% to 5.2%. The case is similar in other countries of emerging market.
In short term, equities may get support by government pension fund and some investors, who take bottom picking strategies. However, it may be risky to try to catch a bottom and it rarely works. We prefer taking a more prudent approach to wait-and-see.
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