{"id":222799,"date":"2018-02-02T11:03:31","date_gmt":"2018-02-02T09:03:31","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=222799"},"modified":"2018-02-02T11:04:22","modified_gmt":"2018-02-02T09:04:22","slug":"red-alert-concerns-surrounding-major-emerging-market-sell-off","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/222799\/red-alert-concerns-surrounding-major-emerging-market-sell-off\/","title":{"rendered":"“Red alert” concerns surrounding major emerging market sell-off"},"content":{"rendered":"

As emerging markets continue to rally, a number of analysts have already begun to question whether they may have reached their peak.<\/p>\n

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The weight of money pouring\u00a0into emerging markets\u00a0has been intense, said\u00a0Morgan Stanley equity strategist Jonathan Garner speaking to Australia’s Financial Review<\/a><\/strong>.<\/p>\n

“Since late 2016, investors around the world have sunk $US100 billion into EM share funds, according to EPFR Global, which tracks such things,” he said.<\/p>\n

“They crammed in\u00a0$US7.9 billion in a single week in late January, making it\u00a0the largest weekly inflow of all time.”<\/p>\n

Garner cautioned that these inflows\u00a0are a strong contrarian indicator and\u00a0should put you on an “amber alert” for a sell-off and a correction.<\/p>\n

He further warned that it wasn’t just the\u00a0inflows data that concerned him, but that prices have moved so quickly that they have blown past his year-end targets \u2013 which escalates that “amber alert” to a “red alert”.<\/p>\n

“We think that as the year goes on, the earnings cycle will be rolling over, and when it rolls over that is typically bad for share prices,” he said.<\/p>\n

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He believes this correction will happen by the northern hemisphere summer (South Africa’s winter) “at the latest, and probably before”.<\/p>\n

Correction?<\/strong><\/p>\n

Garner’s concerns have been echoed by a number of financial analysts speaking to Bloomberg, who said that it may be time for a pause\u00a0amid the euphoria across emerging markets.<\/p>\n

One such is Finisterre Capital, whose\u00a0$700 million Emerging Market Total Return Strategy\u00a0funds investing in fixed-income securities returned 11% and 12% in 2016 and 2017, respectively.\u00a0CIO Damien Buchet said that the scope to advance further this year is limited as growth in developing economies has reached a mature phase.<\/p>\n

\u201cIt\u2019s quite striking everyone becomes so positive after we have rallied so much,\u201d said Buchet.<\/p>\n

\u201cWe\u2019re in a less positive part of the cycle than we were two years ago, which doesn\u2019t mean that the next stage is a market crisis but a repricing is probably more accurate.”<\/p>\n

The rand is currently on the back of its best three-month run in almost 10 years as it rides a wave of optimism following Deputy President Cyril Ramaphosa\u2019s election as the leader of the ruling African National Congress.<\/p>\n

The 19% gain in the period ended 31 January is more than double that of the next-best emerging-market currency – Poland\u2019s zloty.<\/p>\n

At 10:50 SAST on\u00a0Friday, the rand was trading at R11.99 to the dollar, R17.04 to the pound and R14.97 to the euro.<\/p>\n<\/div>\n<\/div>\n

With reporting from Bloomberg.<\/em><\/p>\n

\n

Read:\u00a0The rand last looked this good 10 years ago<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

As emerging markets continue to rally, a number of analysts have already begun to question whether they may have reached their peak.<\/p>\n","protected":false},"author":10,"featured_media":222767,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26,2890],"class_list":["post-222799","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline","tag-morgan-stanley"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/222799","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=222799"}],"version-history":[{"count":6,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/222799\/revisions"}],"predecessor-version":[{"id":222821,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/222799\/revisions\/222821"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/222767"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=222799"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=222799"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=222799"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}