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Contagion hits emerging market fixed income
21 October 2011
Chaos in developed financial markets is spilling over to their emerging peers. What does this mean for emerging market fixed income investors? Hugo Cox reports.
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ING Investment management
fixed income
China
Indonesia
With positive demographics, abundant commodities and levels of government debt that would make a Eurozone finance green with envy, emerging market (EM) fixed-income should be an easy sell to the rational investor. But that’s not the case - investors are dumping their holdings of EM bonds quicker than in the darkest days of the financial crisis. The week ending September 28 saw the largest outflows from the region’s bond funds - $3.2bn – since ,the records of US data provider EPFR Global started. Outflows over each of the subsequent two weeks were $1.4bn. Widespread risk aversion had, up to then, confined large scale redemptions to emerging market equities – where index levels peaked in April – and currencies, which have depreciated sharply against the dollar since the spring. Of the main emerging market currencies only the Chinese renminbi and the Indonesian rupiah are up against the dollar in 2011. Panic selling...
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