Emerging Markets Have a Lot Further to Fall

The emerging markets are likely to fall much further as a result of their correlation with the U.S. economy, writes Sitka Pacific Capital Management in its latest letter to investors. The following is an excerpt from the letter:

click to enlarge

The MSCI Emerging Markets Index [shown in this chart] includes countries such as China, Brazil, South Korea and Mexico, among many other others. Investing in emerging markets was all the rage in 2007 as China’s stock markets made dramatic gains, but in hindsight that seems to have been a euphoric end to the trend. Since hitting a new high in October China’s stock market has fallen more than 30% in the last 3 months, as have many other emerging markets. It now appears likely that these markets have much further to fall in the next 12-24 months.

Comments

[floridadon:]

It would be nice to see some supporting argument for this statement.

2008 Feb 08 12:45 PM

[cyberdoog:]

As the Baby Boomers age and jobs move over seas, Americans and Europeans will continue to look for cheap goods created by low cost labor in emerging markets. Environmental and Ethics regulations will continue to drive businesses out as well. Growth of emerging market economies will continue to outpace the US. Baby boomers will continue to look for higher rates of return as they invest their nest eggs. Walmart, Target, JC Penny, Best Buy, et al. still continue to buy goods from China. Timberland Shoes are no longer made in Maine. Africa is the new frontier.

2008 Feb 08 10:08 PM

[jcrash:]

So, articles now just consist of wild suppositions with no corroborating evidence? Pointing at what something did last week does not indicate what it will do next week.

2008 Feb 10 02:27 PM

[User 145597:]

The fact that India is announcing the creation of a sovereign fund is for us another indication that the fall is questionable, as illustrated by research conducted by Kalaventures

2008 Feb 20 04:41 PM