June is bustin’ out all over. Especially in emerging markets.
Recent attitudes have been positively giddy. Commodity prices have helped stock indices from Singapore to Turkey to Brazil. An composite of these markets has risen over 70% since March.
Clearly, the shock resulting from last year’s credit crunch is fading. In May, Singapore’s exports rebounded 5%; Hong Kong’s unemployment rate was unchanged; and IMF support has reduced the risk of a cash crisis in Eastern Europe But some clouds are on the horizon. All the stimulus has given governments little room to maneuver should the economy turn down further. Moreover, rising energy prices could stress large importers like China and India. Money spent on oil can’t fund other stuff.
No tree grows straight to heaven. While we’re constructive on how emerging markets will perform, investors need to hang on. The ride could get bumpy from here.
Douglas R. Tengdin, CFA
Chief Investment Officer
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