Wednesday, December 2, 2015

Letting go of emerging market economy assets


1. The days of forays into high risk high reward may be over. As the US economy seems to be on a reassuring path, it makes sense for investors to return to advanced economies.
2. Japan’s public pension reserve fund, Pension Investment Fund reportedly  lost 7.89 trillion yen ($64.22 billion) in the three months to September, or 5.59%, bringing the value of its total assets to ¥135.1 trillion.  This is a consequence of global sell offs. Against this background, investors should b happy to scramble away from a China triggered ebb in asset values , away from the emerging market assets to  the developed markets in a flight to quality.
3. Janet Yellen's two back to back speeches will be heard or read for the 'little said, the vast unsaid.' No central banker will speak before the policy meet and lead markets to a decision. However, the Fed has been fairly transparent in its hints.  Data seems to suggest a hike is due sooner than later. Global situation may have stabilized a bit for the Fed to keep moving on its call.
4. In the initial round, economies like Japan would be affected if emerging economies are affected. Advanced economies have factored all this probable tumult in the wake of a rate hike. Bank of Japan already has plans afoot to absorb such an impact. Australia's Reserve Bank says that new opportunities for growth will have emerged, resulting from things like the growth in the middle class of Asia, and the growth of India is a potential opportunity for Australia. European Central Bank's QE seems to be yielding positive results.
In the long run, investors may prefer advanced economic environments. All happy families resemble one another; every unhappy family is unhappy in its own way. Leo Tolstoy   

5. Looks like USD is set for for more highs. The Canadian and Australian Dollars might give good company. Emerging economy currencies seem destined to fall. 

This blog recommends no investment. All views expressed are without any risk or responsibility. 



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