Seeking Alpha

Contagion spreads for emerging currencies

  • The iShares Emerging Markets Index ETF (EEM) is off 1.3% in the premarket as investors rush out of emerging currencies. The Turkish lira plunged to a record low today, while Ukraine's hryvnia fell to a four-year low, and South Africa's Rand dove to its weakest since October 2008 following Argentina's decision to devalue the peso and a weak PMI report out of China yesterday.
  • “We continue to see the risks surrounding China’s macro trajectory as having a negative impact on EM,” says Morgan Stanley's Rashique Rahman. “As capital costs rise and investment slows, commodity prices should come under pressure, boding poorly for economies linked to China’s old growth model.”
  • In Russia, the ruble has declined to an all-time low vs. the euro.
  • Of Turkey from Rareview Macro's Neil Azous: "Their net foreign-exchange reserves are dwindling pretty fast. They’re definitely in the danger zone. If you’re a money manager, the responsible action is to take some measures to reduce risk.”
  • Emerging market ETFs: EEM, VWO, DEM, EDC, DGS, EDZ, EEMV, EEB, SCHE, EDIV, IEMG, DVYE, EEV, BIK, EWX, BKF, PIE, CEW, ADRE, HILO, EUM, FNI, EET, GMM, PXH, BBRC, EEMS, EELV, FEMS, EEME, EMDD, BICK, EMCR, DBEM, FEM, EWEM, EVAL, JEM, EMLB, EMBB, TLTE, EEHB, EGRW, FNDE, EMSA, EMHD, EMFT, EMDR, QEM, QDEM
  • Relevant country ETFs: TUR, EWS, EZA, ARGT, EWSS, FXSG
Comments (7)
  • The logical Keynesian solution for these countries is to print their way to prosperity.

     

    QE programs for EVERYBODY!

     

    I bet the people of Argentina, South Africa, Russia, Ukraine and Turkey aren't laughing at gold right about now.
    24 Jan, 09:21 AM Reply Like
  • Contagion is the right word. Only what is the disease?

     

    Lack of knowledge of fundamental Economic principles? Civil unrest? Civil War? Racial Islam? Government corruption?Trends toward Socialism again? The resurgence of Communism? Global warming? Disdain for the rule of law? Disdain for fossil fuels? Disdain for Capitalism? Disdain for conservatism? Disdain for the family unit? Disdain for Christianity?

     

    Battle of world domination? Ops... that is a video game. Then again some governments think that is how the world works.
    24 Jan, 09:49 AM Reply Like
  • Does this remind anyone of the Asian crisis of the late 90's?
    24 Jan, 10:56 AM Reply Like
  • All markets are down today, emerging markets slightly more than Japan and US, but no more than Germany, France or UK.

     

    TUR (Turkey) did worse than other EM, I guess largely due to its extreme volatility in the past (it declined 40% in 2011, then went up 70% in 2012, then declined 35% in 2013 etc).

     

    I wouldn´t translate any of this to a recommendation to exit emerging markets or be more bearish on those than the developed. Unlike in the past EM now trades at very low valuation (low p/e, cyclical adjusted p/e, market cap to gdp etc). The value of the Chinese stock market is only 1/7 that of the US for example. In early 2008 it was 1/3. FXI (China) is flat over the past two years, whereas US is up 50%. I´d much rather buy China or Turkey than US now.

     

    The idea of a repetition of the past: very strong dollar + collapsing emerging markets I think one should be cautious about at this point. The dollar may decline in value against other currencies this time, as it did in the 1970´s and 2006-2008.

     

    The sentiments among many have recently been that it is too late to buy US stocks and too early to buy emerging markets. However the latter belief may soon change.
    24 Jan, 11:40 AM Reply Like
  • the European markets are all levered to global growth.

     

    Where is all that talk about the ten year at 3 percent again?

     

    Oh, yeah. "that was just somebody's trading position. We actually give you the exactly wrong thing to do in order to finance our financial media."

     

    At some point you go from "owning the media" to "the media owning you" however. http://bit.ly/1dBoL8G
    24 Jan, 01:17 PM Reply Like
  • This is the right perspective. I bought more TUR today after starting with a small position a week ago. Also long Thailand, Vietnam, and HAO China small cap, which is forming an uptrend.

     

    Forget the FXI. These stocks are all cheap and have done nothing for years. It takes vision but this is the wrong time to be bearish on EM's and especially China.
    24 Jan, 06:05 PM Reply Like
  • Watch Hongkong and Shanghai Index represented by FXI since Hongkong can be considered as the 'hyper-active' of the Emerging Markets with traders in that colony among the sharpest in the world:

     

    >> FXI Daily: http://bit.ly/M4rUZi

     

    For FXI, it is still Either/Or situation.

     

    The US is already late with regards to trading the China Syndrome. FXI is practically at it's last stage of the most recent meltdown.
    24 Jan, 12:27 PM Reply Like
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