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Research

Turning Japanese

Weekly investor research

18 August 2014

The situation in Eastern Ukraine is reaching another critical stage, which can now usher in genuine de-escalation or yet another round of self-destructive economic retaliations between the West and Russia. Indonesia looks better than the latest current account number would suggest. Malaysia is scorching hot. Uncertainty erupts in...

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Buy Emerging Markets during a technical correction in Developed Markets

Weekly investor research

11 August 2014

Spikes in VIX have proven to be good opportunities to add Emerging Markets (EM) exposure. Technicals and valuations have improved after a technically driven adjustment in asset prices in developed economies. The pretext for the adjustment is geopolitics, but the broader economic picture looks better, not worse, and is doubtful, in...

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The Emerging Markets fixed income and equity universes - an update

The Emerging View

August 2014

EM fixed income will triple in size in Dollar terms to USD 45trn by 2020 with the share of local currency rising to 90% of total outstanding, while corporates will account for more than 60% of total outstanding. We expect EM equity market cap to rise to nearly USD 40trn, more than twice its present size.

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Saudi Arabia: A USD 560bn Opportunity

The Emerging View

August 2014

We are excited about the prospect of Saudi Arabia’s equity markets opening to foreign direct investment. The Saudi market has, until now, remained largely unnoticed. The recent announcement that approval has been granted to open the Saudi market to foreign investors can be a game changer for the Middle East. Saudi Arabia is a big,...

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Hero to Zero

Weekly investor research

04 August 2014

US stocks have priced in a great amount of growth, but not rising rates and tapering. A correction in developed markets is entirely warranted, in our view. To the extent Emerging Markets (EM) assets are lower in price it is a good time to add as EM fundamentals look solid and improving in a number of important countries. This week,...

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Taking stock of Saudi Arabia

Weekly investor research

28 July 2014

In a very eventful week, Saudi Arabia opened its USD 530bn stock market to foreign investors for the first time. The Saudi Market is under-valued, under-owned and, until now, under the radar. US mutual fund flows are returning to Emerging Markets (EM) local markets, but so far less than a third of what left has returned. This means...

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The illusion of weekly flow data

The Emerging View

July 2014

We believe, the market obsession with analysing weekly flows of US mutual fund investors is understandable but flawed. These flows are not representative of the market as a whole, and they ignore the reality of where the real investor base lies. They do illustrate a number of points well – such as how pro-cyclical the flows are...

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A spike in vol in the summer lull

Weekly investor research

21 July 2014

Headlines are habitually assigned excessive importance in Emerging Markets (EM), not least during the summer lull, and geopolitics-related headlines particularly so. While the tragic loss of a Malaysian airliner over Eastern Ukraine and severe violence in Gaza are newsworthy, their impact on sentiment is likely to be much greater...

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EM Fixed Income universe grows bigger and stronger

Weekly investor research

14 July 2014

The Emerging Markets (EM) fixed income universe increased by 3% in 2013 to reach USD 14.5trn. This compares to USD 103trn for developed economies. EM is now more than 50% of global GDP, so EM’s credit fundamentals improved further relative to developed economies last year. This means that investors have a safer alternative to developed...

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Licence to speculate

Weekly investor research

07 July 2014

In a special version of the weekly, we put last week’s Fed and ECB announcements into context. Both institutions last week issued licences to speculate. Bubble Economics now appears to be official policy across developed economies. This poses serious challenges to asset allocators. Notwithstanding these challenges, Bubble Economics...

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The difference between Paraguay and Uruguay: Active Management in the coming global monetary policy shock

The Emerging View

July 2014

Introduction The approaching shock caused by global monetary policy normalisation will strongly accentuate the differences between Emerging Markets (EM) countries. Knowing the differences between EM countries will therefore become critical to performance. This poses a challenge to a market that all too often glosses over the differences...

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Cliffhanger in Argentina

Weekly investor research

30 June 2014

The stand-off in Argentina intensified last week when funds intended for today’s coupon payment on the 2033 Discount bonds were returned to the government. Despite continuing tensions on the ground, the situation in Ukraine improves further as President Poroshenko launches his constitutional reform proposal. More positive data...

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Karibu Kenya!

Weekly investor research

23 June 2014

We welcome Kenya as the 62nd member of the Emerging Markets (EM) external debt asset class. We put the recent upside economic surprises in Colombia and Mexico into the context of future tighter global financial conditions. We report the latest poll numbers in Brazil ahead of the October election. We also discuss Argentina, where...

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The High Income Trap

The Emerging View

June 2014

Introduction Emerging Markets (EM) now account for more than 50% of global GDP and there are nearly three times as many EM countries as developed economies in the world. EM has achieved impressive convergence with richer countries over the past 25 years. Still, what is all that wonderful progress worth if the convergence is unsustainable?...

June 14 High Income trap.pdf

Has Godot arrived in Mexico?

Weekly investor research

16 June 2014

Mexican data is slowly getting better, after a long wait. Turkey’s GDP number shows that the economy is adjusting sharply to the rate hikes earlier this year. The US Supreme Court is set to rule early this week on the holdout case in Argentina. Santos’ re-election in Colombia is good news. China’s non-admission to the EM equity...

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Shale talks in Argentina could be a game changer

Weekly investor research

09 June 2014

Argentina’s government and provinces embark on potentially game-changing talks over shale gas. In Ukraine, Poroshenko meets Putin to keep a diplomatic solution on track. Mexico cuts 50bps, having earned the ability to do so. Dilma’s approval rating drops further. Thailand’s consumers perk up. Malaysia produces another strong...

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Beware the bandwagons

Weekly investor research

02 June 2014

In an environment where traditional market drivers have been scarce we highlight the dangers of bandwagons. We find the initial Ukraine election trade is over. We discuss inflation in Brazil and the country’s growth challenge. We also note China’s stronger PMI numbers, report how power shortages in India illustrate one of Prime...

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Poroshenko wins big in Ukraine

Weekly investor research

27 May 2014

We provide our views on the elections in Ukraine, Colombia, and Egypt. Modi appoints his finance minister in India. Dilma’s approval ratings stabilise. Will Medina use his mandate and the strong economy to change the constitution? We also discuss political divisions within the Argentinian government, possible sanctions against...

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Are Emerging Markets bond indices public goods?

The Emerging View

May 2014

In our view, one of the few certainties about the world of tomorrow is that global financial conditions will tighten. There will be less money available and competition will intensify among the nations to maintain their share of the shrinking global financial pie. This raises an important question: how are Emerging Markets (EM) countries...

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All change in India

Weekly investor research

19 May 2014

India voted for change and the ball is now in Narendra Modi’s court to deliver. Eastern Europe enjoys ‘Poldilocks’. The Ukraine situation receded somewhat from the headlines as Europe and Russia engaged in gas talks. Officials in Colombia, which has one of the strongest lobbies in favour of a cheap currency, began to verbally...

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Financial divergence: How ready are Emerging Markets for global financial tightening?

The Emerging View

May 2014

Contrary to popular perceptions, Emerging Markets (EM) countries have been deprived of their fair share of global finance. A disproportionate amount of global capital has gone to developed markets, especially since the onset of QE. EM financial market ‘divergence’ from developed financial markets has taken place in spite of evidence...

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Yearning for inflation

Weekly investor research

12 May 2014

Why is the market so desperate for the ECB to ease? We explain why EUR strength is merely a precursor for much larger changes in global currencies that are likely to leave many countries, especially Europe and Japan, yearning for inflation. We provide an update on Russia-Ukraine situation, talk about politics in Indonesia, South...

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Move over please!

Weekly investor research

06 May 2014

Much attention was paid to the expectation that China will overtake the US as the world’s largest economy this year, but the bigger story in our view is that Emerging Markets (EM) actually overtook developed economies as the largest share of global GDP already last year. This is clear from new IMF data released in April. Clearly,...

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Mispriced Risk? Investing in the Middle East

The Emerging View

April 2014

There was no shortage of concerns about Emerging Markets (EM) last year. Investors fretted about the tapering of the US Fed’s quantitative easing programme, China’s growth outlook, tension escalated in Syria, and both Turkey and Egypt faced social and often violent unrest. Global Emerging Markets investors read the news and increasingly...

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Silence is golden

Weekly investor research

28 April 2014

Despite supporting sanctions against Russia the EU has adopted a relatively low profile on the Ukraine question compared to the US. This is deliberate, understandable, tactical, and significant, in our view. We explain why we believe the current tensions between Russia and the US will eventually give way to a diplomatic solution...

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The Fed and the Oracle of Delphi

Weekly investor research

22 April 2014

Emerging Markets (EM) performance has been relatively resilient in the face of US dollar strength on the back of stronger US data and dovish comments from the Fed. EM fixed income benchmarks ended the week close to flat, currencies posted a mildly negative performance, and EM equities had strong positive performance. In a relatively...

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Softer, Better, Faster, Stronger

Weekly investor research

14 April 2014

For several months last year Emerging Markets (EM) bonds were seemingly trading as a leveraged play on financial conditions. Performance was highly correlated with the price of a 2-year treasury futures contract: falling when Fed Funds hikes seemed more imminent, and rallying when this prospect seemed further out in the future. This...

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The global economic rebalance continues

Weekly investor research

07 April 2014

The global economic rebalancing act extended over the past week, with both the Brazilian and Indonesian trade balances bouncing back into surplus. In China, the government announced a small economic stimulus package designed to reverse the marked slowdown experienced in the first quarter. Conversely, in developed markets, overly...

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The big bad imbalance: EM FX vs. US dollar positioning

Market Commentary

02 April 2014

Investors are rightly taking a fresh look at adding Emerging Markets (EM) exposure after nearly a 12 month EM bear market. Technicals are better, valuations attractive, and EM has shown fundamental resilience in the face of shrill media pessimism and two ‘taper-tantrum’ related outflows. Still, one thing holds back many potential...

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IMF - read the West - comes good in Ukraine

Weekly investor research

31 March 2014

Good news for Ukraine as the IMF approves a two year standby agreement. Venezuela finally launches SICAD II with a major de facto devaluation. Argentina taps the local bond market for the first time in five years. Brazil is downgraded and no one cares, while a fresh poll shows a sudden decline in support for President Dilma Rousseff....

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Colombian fireworks and the Fed's head fake

Weekly investor research

24 March 2014

Colombia's weighting in the GBI index expands sharply as access for foreign investors improves. Investors should expect more along similar lines from other Emerging Markets (EM) countries. We also discuss polls in Brazil, Russian economic data, the latest bout of hard landing fears in China, and financing issues in Argentina (in...

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Emerging Markets headlines provide fig leaf for developed market problems

Weekly investor research

17 March 2014

Global market sentiment is weak, allegedly due to Russia and China. However, we think tapering, bad technicals, and weak data are a big part of the reason for poor performance of global stocks. Emerging Markets (EM) sell-offs are becoming less violent and shorter lived as technicals, valuations, and fundamentals prove resilient despite...

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Bull in a China shop

The Emerging View

March 2014

Amidst yet another bout of fears about China’s future, we set out our views on the outlook for growth, the financial system, China’s public finances, reforms, and the country’s external balances. China is in the midst of a storming change. Interest rate liberalisation is coming as China prepares to let the bond market play...

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Growing opportunities in Emerging Markets corporate bonds

The Emerging View

March 2014

Executive summary • The Emerging Markets corporate bond debt universe is much larger and much more diverse than investors commonly assume • This market offers investors opportunities to invest in less leveraged companies trading at wider spreads in comparison to its better known developed markets counterpart • This market has...

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Ukraine's journey from pariah state to baby of the West

Weekly investor research

10 March 2014

Positive noises from the IMF in Ukraine bode well for early disbursement of emergency funding. Russia continues to be in the political cross-hairs as EU/US seeks a formula for punishment that both appears tough and at the same time does not damage economic European relations with Russia. The default of a Chinese domestic corporate...

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Cold War echo

Weekly investor research

03 March 2014

Events in Ukraine are a reminder of just how damaging the Cold War was for Emerging Markets. The silver lining is that superpower tensions are much less prevalent today and we think economic constraints make it unlikely that the problem will spread beyond a few strategically misfortunate EM countries such as Egypt and Syria. Indeed,...

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Sanusi's large shoes

Weekly investor research

24 February 2014

Lamido Sanusi takes a bow as he leaves Nigeria’s Central Bank, Argentina formally links its new CPI index to inflation-linked bonds, China shakes up currency speculators and starts SOE reform, Brazil addresses a fiscal challenge head on, and Ukraine takes a huge step forward towards a solution to its political crisis. Away from...

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Denial is a river in Africa

Weekly investor research

17 February 2014

We review a long list of economic and policy developments in Emerging Markets (EM) from the last seven days. Most of them are extremely encouraging. There is far more value than crisis in EM, even if denial seems to be the order of the day. Meanwhile, both the Fed and the Bank of England (BOE) came one step closer to openly admitting...

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A return to rationality

Weekly investor research

10 February 2014

The market’s two largest convictions going into 2014 were a stronger US and a crisis in Emerging Markets (EM). Both these views are unravelling. US manufacturing dropped sharply following two quarters of significant inventory accumulation. US non-farm payrolls disappointed for the second month in a row. If this run of US bad data...

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Emerging Markets small caps - growing up fast

The Emerging View

February 2014

Emerging Markets equities have matured as an asset class. Once-controversial arguments for investing in Emerging Markets (EM) are now widely accepted and most large institutional portfolios have a dedicated strategic exposure. As a group, emerging economies are growing faster than developed economies and will continue to do so for...

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The illusion of harmonious global economic policy coordination

Weekly investor research

03 February 2014

Indian Central Bank Chief, Raghuram Rajan, shatters the pleasant fiction of harmonious global economic policy coordination. In our view, his remarks are timely and important. The global imbalances have yet to be unwound and there will be important economic consequences for developed countries and Emerging Markets (EM) alike. Who...

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Taper tantrum two and the dumbing down of EM

Weekly investor research

27 January 2014

An unprecedented spike in correlations between US real rates and Emerging Markets (EM) spreads reflects the current taper tantrum and a general dumbing down in the way the market trades EM. We explain in detail why an impending possible default in a Chinese trust product loan poses no major risk to China. We discuss Turkey and Argentina....

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Market Prospects 2014

Yearly View

20 January 2014

The outlook for Emerging Markets (EM) going into 2014 is stronger than last year due to a triplet of tailwinds, including better fundamentals, more favourable market technicals and attractive valuations after a sharp technical sell-off in 2013. We review the technical picture for the asset class. We discuss the wider global backdrop,...

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China's FX reserves reach new high as Indian inflation declines

Weekly investor research

20 January 2014

The World Bank paints a more positive picture for the global economy in 2014, including Emerging Markets (EM), but parts of the media appear spellbound by the risk scenarios. Meanwhile, in EM China’s reserves set a new record, Indian inflation headed lower, Russia took another step towards a fully flexible currency, Turkey’s...

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The journey from fear to fact

Weekly investor research

13 January 2014

Sell-offs in Emerging Markets (EM) often start simply because investors are ignorant about how EM will respond to changes in the global environment, such as Fed tapering. In the face of uncertainty, investors turn to out-dated notions of EM fragility and let themselves be guided by past behaviour. Selling ensues, regardless of the...

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Worlds apart: Debt trajectories in China and the USA

Weekly investor research

06 January 2014

We review the latest debt numbers from China. We calculate the sustainability of China’s debt stock going forward and we compare the results with US debt dynamics. We show that China and the US are worlds apart when it comes to debt. We conclude that the market continues to significantly under-estimate risks in developed economies...

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The Fed ditches one of its crutches

Weekly investor research

23 December 2013

Ukraine plays the crisis card and scores big. The Indian central bank’s growing assertiveness is refreshing and welcome. Rising political noise in Turkey could have positive unintended consequences for economic policy. And the Fed deems the US economy capable of walking with one less crutch – the commencement of tapering is good...

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Frontier Markets

The Emerging View

December 2013

Taking the long view Global Frontier Markets are about to register yet another strong annual performance since the launch of the MSCI Frontier Markets Index in 2003. Frontier Markets are up 24%, while Emerging Markets (EM) are down 4% this year according to the relevant MSCI index in USD terms. This strong performance, in what has...

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Mexico's energy reform, India's election shocker, Turkey's current account, and monetary policy tightening in China

Weekly investor research

16 December 2013

Mexico passed the energy reform with overwhelming support, while the outcome of local elections in India gives rise to optimism about reforms after the general election next year. Turkey’s current account is on track for material improvement, while China’s authorities continue to steadily prepare their economy for tighter financial...

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The good, the bad, and the ugly

Weekly investor research

09 December 2013

Are you curious about the political noise in Thailand and Ukraine? Or the dramatic turnaround in India and Indonesia’s external balances? Or are you concerned about the fiscal situation in Brazil and want to get up to speed with reforms in Mexico? Perhaps you lie awake at night thinking about inflation in Turkey after the currency...

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Business as usual in Emerging Markets as year-end market dynamics begin to make themselves felt

Weekly investor research

02 December 2013

Breath-taking pace of reform in Mexico, 10% rates in Brazil, scorching growth in the Philippines, a resolution to the YPF dispute in Argentina, the government survives a no-confidence vote in Thailand, South Korea’s big BOP surplus surprise, Nigeria set to overtake South Africa as the continent’s largest economy, Ukraine plays...

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Emerging Markets variety versus the singular focus on tapering in the developed world

Weekly investor research

25 November 2013

We highlight developments from the last week in a number of Emerging Markets (EM) countries of different credit qualities. The coverage highlights the enormous variety of issues affecting the countries in the EM asset class. The diversity of issues stands in sharp contrast with the almost singular focus on central bank policies in...

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Fed Captain and the World of Tomorrow

The Emerging View

November 2013

Bond vigilantes 1 – 0 Fed The US treasury market is already caught up in an almighty battle between bond vigilantes and the Fed. The bond vigilantes won the first round, when they forced the Fed to U-turn on tapering in September. The risk for the Fed is the long end of the curve. The US economy is heavily indebted and higher real rates...

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EM growth beats expectations and negative market sentiment in Q3

Weekly investor research

18 November 2013

Third quarter GDP data from a quarter of the EM universe as well as the three main HIDC (Heavily Indebted Developed Countries) economies show that developed economies were more affected by tighter financial conditions over the summer than Emerging Markets (EM). This finding is of course diametrically opposed to most perceptions and...

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Mexican reform momentum gathers pace as the Fed prepares for Tapering II

Weekly investor research

11 November 2013

Elections will dominate the outlook for Emerging Markets (EM) in 2014. This year we had a taster of things to come in the shape of Mexico’s reform effort. A review of market moves in Mexico over the past year or so shows that global events as much as Mexico-specific factors drove the price action. In the past week Mexico passed...

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A Star is born

Weekly investor research

04 November 2013

One of the reasons to invest in Emerging Markets (EM) is the possibility of capturing the upside from rapid structural change. This past week saw the birth of local currency corporate bonds as an EM asset class. We believe local currency corporate bonds will become a star in the EM fixed income sky. Of course, the USD 5.8trn market...

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Investor relevant news from Russia, China and Malaysia

Weekly investor research

28 October 2013

Russia is preparing to introduce Euroclearable local currency corporate bonds in early 2014. This is an important milestone for Emerging Markets (EM) fixed income. Local currency corporate bonds are not recognised as an asset class, and do not even have an index. Yet, this asset class is among the fastest developing segments in Emerging...

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Stocks versus flows

Weekly investor research

21 October 2013

China continues to confound those who predict a hard landing. In Q3, China grew 7.8% yoy, FX reserves set a new all-time high, and the Chinese currency appreciated to the strongest level since 1993. China’s trade surplus was substantial, but smaller than last month. While markets tend to focus on flow variables – such as trade...

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Turkey: Slow adjustment, not crisis

The Emerging View

October 2013

During the summer of 2013 sentiment about Emerging Markets deteriorated to the worst levels seen since 2008/2009. Turkey was singled out for special treatment in the sell-off. Critics focus on the country’s large current account deficit, the dependence on short-term portfolio flows to fund this deficit, and rapid growth of domestic...

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Lemons and cherries in global asset allocation

Weekly investor research

14 October 2013

The Chinese word for crisis is made up of two characters: ‘danger’ and ‘opportunity’. Another week of data from Emerging Markets (EM) shows that the summer’s sell-off was more of the latter than the former. We highlight a few important developments, including improving trade numbers in India, falling inflation in Brazil,...

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Risk free (by definition only)

Weekly investor research

07 October 2013

Trade and current account balance data from a number of Emerging Markets showed material improvement over the past month. Meanwhile, the upturn in the global manufacturing cycle continued into September, according to new data released over the last week. Emerging Markets Purchasing Manager Indices (PMIs) appear to be lagging developed...

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Signs of growth in Mexico as US political noise returns

Weekly investor research

30 September 2013

China bears fear over-investment more than anything else. But China’s statistics systematically overstate investment and understate consumption. Once suitable adjustments are made China’s economy looks more balanced. High frequency data begins to turn positive in Mexico as key political battles over reforms draw closer. Meanwhile,...

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Emerging Markets after the summer sell-off: Hold or Add?

Market Commentary

24 September 2013

We believe Emerging Markets (EM) debt and equities are likely to offer attractive returns over the next 12 months due to strong technicals, improving fundamentals, and attractive valuations in the wake of the summer sell-off.

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The Fed's 405% problem

Weekly investor research

23 September 2013

The past three months have provided a useful illustration of how Emerging Markets (EM) respond to external shocks from developed economies. As in previous similar episodes, asset prices over-reacted, while fundamentals remained solid. Value has been created in the process. Meanwhile, the Fed’s decision not to taper smashed the...

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A pleasant fiction

The Emerging View

September 2013

Over the summer a consensus was established that tighter financial conditions in developed countries and in the US in particular will impact Emerging Markets (EM) adversely. This consensus is a pleasant fiction for some, but to others (such as us) it’s a tiresome regurgitation of hopelessly outdated ideas about Emerging Markets....

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Value overtakes flows

Weekly investor research

16 September 2013

Sixteen weeks of outflows have created value in Emerging Markets fixed income against a backdrop of disappointing economic data in developed economies and better economic data in Emerging Markets. Indonesia successfully tapped global markets, Mexico launched its fiscal reform, and Argentina set aside nearly USD 10bn for debt service...

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Happy 60th!

Weekly investor research

09 September 2013

Last week saw two more countries enter the JP Morgan EMBI GD index, the main Emerging Markets bond index, which now covers 60 countries. The investable universe is far larger. Yet, despite this enormous and diverse universe, the market typically tends to focus on just one or two countries and extrapolate to the entire asset class....

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Emerging Markets central banks begin to stir

Weekly investor research

02 September 2013

Central banks in Emerging Markets (EM) began to stir over the past week. Brazil and Indonesia both launched currency swap facilities and raised rates, while India put in place facilities aimed at easing US Dollar access for state oil importers. However, in our view, Emerging Markets are far from firing their bazookas, partly because...

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Time to take the chill pill

Weekly investor research

27 August 2013

This week we explain why some investors have recently pulled money from Emerging Markets. We explain why the current volatility does not change the outlook for currencies and why there is no new Asian crisis. We describe the Emerging Markets’ formidable defences and why they have barely yet been used. We explain what happens if...

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The Emerging Markets fixed income universe

The Emerging View

August 2013

The long-term case for investing in Emerging Markets (EM) is strong and rests on the arguments that these economies will grow faster than developed markets over the cycle due to economic convergence and that their financial markets in the emerging world will expand very rapidly. In this month’s Emerging View, we draw on new data...

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Signs of a modest cyclical upswing in EM

Weekly investor research

19 August 2013

The past week produced solid evidence that a modest cyclical upswing is taking root in Emerging Markets. Q2 GDP growth rose in two thirds of the countries that released fresh macro data in the past week. However, country stories continue to play an important part in the broader picture. The non-Emerging Markets economic backdrop...

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Tapering is priced and China returns

Weekly investor research

12 August 2013

The most important developments last week were the market getting comfortable with the notion that tapering and rate hikes are not the same thing, and China rising from the ashes, once again defying predictions of an elusive hard landing. Emerging Markets inflation also failed to disappoint despite June’s currency volatility, and...

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Mexico heads for an historic constitution reform

Weekly investor research

05 August 2013

Mexico heads for an historic constitution reform as the global manufacturing cycle shows signs of turning positive.

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The Emperor's new clothes

Market Commentary

30 July 2013

This week’s revision of US GDP numbers is widely expected to point to a larger US economy. A bigger economy implies better debt ratios, higher productivity, but also higher saving rates.

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The market begins to distinguish between EM countries

Weekly investor research

29 July 2013

The market has begun to re-focus on fundamentals. This is healthy because Emerging Markets are highly diverse. For example, the BRICs have little in common apart from their size. The removal of IOF taxes in Brazil and value in the government’ oversold bond market triggered net portfolio inflows into Brazil in the month of June....

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Emerging Markets and Tapering

The Emerging View

July 2013

Federal Reserve Chairman Ben Bernanke’s announcement that Quantitative Easing (QE) will be scaled back carries enormous symbolic significance. The commencement of tapering marks the first reduction in the pace of monetary easing in the United States since the crisis began in 08/09, but the market has been keen to extend the logic...

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22 July 2013

Weekly investor research

22 July 2013

The past week saw a number of Emerging Markets announce fresh initiatives to boost infrastructure investment, doubtless prompted by the prospect of tougher financial conditions. This is exactly the right response, in our view. Mexico pushed forward the timeline for energy reform. China took another step towards interest rate liberalisation....

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15 July 2013

Weekly investor research

15 July 2013

Against the backdrop of a re-pricing of US rates a number of Emerging Markets central banks this week reviewed their monetary policies. Prominence was given to the 50bps of hikes implemented by Indonesia and Brazil, but the main message from Emerging Markets last week was in fact that everything is cool. Russia, Malaysia, Chile,...

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8th July 2013

Weekly investor research

08 July 2013

We explain our view on political dynamics in Emerging Markets in light of the recent turmoil in Egypt. Political dynamics across Emerging Markets remain strongly supportive of prudent economic policies. Egypt falls into a category of countries, however, with proclivity to higher levels of political risk, wherefore the events in Cairo...

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1st July 2013

Weekly investor research

01 July 2013

Emerging Market assets rallied strongly over the past week as the markets stabilised on the back of softer US data, improving technicals and efforts by Emerging Market central banks and finance ministries to provide liquidity to the market. Emerging Markets were able to achieve this with very modest interventions, underlining the...

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24 June 2013

Weekly investor research

24 June 2013

The policy response in Brazil illustrates the short leash available to policy makers in most Emerging Markets. Strong bottom-up demand for sustained macroeconomic stability tends to produce rapid policy responses when governments lose touch with electorates. Meanwhile, the on-going sell-off in Emerging Markets assets is extremely...

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China funding markets: Yes we can!

Market Commentary

21 June 2013

The repo market in China has recently shown signs of stress with rising interest rates and volatility. What does it tell us about China?

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13 June 2013

Weekly investor research

13 June 2013

The global economy remains extremely unsettled amidst continuing unwinding of crowded positions in US stocks, Japanese stocks, and USDJPY, while the continuing rhetoric is adding to the uncertainty. While tightening of monetary policy is still far away, credit markets have been hit hard by the ongoing uncertainty. We are now fully...

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Convergence, global imbalances and the role of infrastructure in EM

The Emerging View

June 2013

Many Emerging Markets are beginning to exhaust ‘low hanging’ sources of growth as they approach middle income status. Adapting requires not just greater economic flexibility, but also more investment and a more efficient use of capital. Infrastructure investment will play an important role within this process, alongside capital...

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6 June 2013

Weekly investor research

06 June 2013

The on-going change in sentiment about US and Japanese markets is creating value in Emerging Markets

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Market Commentary - June 2013

Market Commentary

05 June 2013

Brazil reduces the IOF tax to show the importance of preserving macro stability

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30 May 2013

Weekly investor research

30 May 2013

Global market sentiment remains extremely volatile on account of continuing uncertainty surrounding the outlook for US monetary policy. Dollar bullishness and treasury market bearishness gave way to dollar weakness and a partial recovery in US treasuries later in the week. The reasons why the uncertain outlook for US monetary policy...

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23 May 2013

Weekly investor research

23 May 2013

The fragility of popular bull market trades in the HIDCs was exposed by Bernanke’s commitment to a more flexible approach to monetary policy in the United States. We believe that it will prove very difficult to unwind very easy policy in the HIDCs as long as debt levels remain at the current size.

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Disequilibrium and the Dollar

The Emerging View

May 2013

Yet another cyclical slowdown is a reminder that HIDCs (Heavily Indebted Developed Countries) have deep structural problems and that the world economy is in a state of deep disequilibrium.

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16th May 2013

Weekly investor research

16 May 2013

The recent positive momentum in US stocks and USDJPY continued in the past week on hopes of continuing recovery in the US economy and successful escape for deflation in Japan. Supply-side data continued to disappoint, however. Speculation about phasing down of Quantitative Easing by the Fed helped to push US treasury yields close...

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9 May 2013

Weekly investor research

09 May 2013

The past two weeks has seen a significant discrepancy emerge between equity market valuations and the underlying trends in the data for the HIDCs (Heavily Indebted Developed Countries), notably the United States. However, without an obvious trigger for a correction in the market and with central banks continuing to signal willingness...

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2 May 2013

Weekly investor research

02 May 2013

The global economy is entering another manufacturing-led cyclical slowdown. These slowdowns are regular events triggered by shocks to final demand. They lead to temporary slowdowns in production and hiring as companies adjust their production levels to bring excess inventories back to levels consistent with observed demand. We do...

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The benefits of diversification into Emerging Markets Equities

The Emerging View

April 2013

In the 1980s, the term ‘Emerging Markets’ was first introduced to distinguish markets which were less developed than the US, Western Europe and Japan, but which were considered to be in the process of rapid growth and urbanisation. They were also considered more risky, as a result of limited foreign direct access, currency controls,...

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25 April 2013

Weekly investor research

25 April 2013

Global-wide data releases over the past few weeks point to a manufacturing slowdown following two strong quarters. While the inventory adjustment-driven ups and down of the global manufacturing cycle do not change the underlying economic environment they can have a significant impact on sentiment and asset prices. As the data has...

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18 April 2013

Weekly investor research

18 April 2013

Global market sentiment continues to be highly erratic due to the uneasy co-existence of elevated asset prices in the HIDCs (Heavily Indebted Developed Countries) at a time of evident weakness in some economic data releases. Over the past week, commodity prices bore the brunt of this mismatch by shifting lower, though stock markets...

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11 April 2013

Weekly investor research

11 April 2013

All Emerging Markets asset classes rallied strongly. Economic weakness accompanied by verbal easing from HIDC central banks boosts sentiment.

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04 April 2013

Weekly investor research

04 April 2013

Japan expands monetary policy easing in a bid to restore growth via a weaker Yen as the pace of global growth slows.

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28 MARCH 2013

Weekly investor research

28 March 2013

Emerging Market equities performed well against a backdrop of softer US data, Cyprus problems, and Italian political noise.

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21 March 2013

Weekly investor research

21 March 2013

Cypriot crisis and weak European PMIs highlight the deep structural weaknesses in HIDCs. In our view, exposure to Emerging Markets is far safer.

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Price and Prejudice

The Emerging View

March 2013

The Emerging Market External Debt Renaissance is underway. Ashmore’s Dehn and Medeiros take a fresh look at the asset class

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14 March 2013

Weekly investor research

14 March 2013

Improving fundamentals in Emerging Markets are overlooked by the market as momentum pushes USD and US stocks deeper into stretched territory.

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Market Commentary

Market Commentary

08 March 2013

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7 March 2013

Weekly investor research

07 March 2013

Global market sentiment remained positive on the back of further promises of easy money from the US. Meanwhile, the UK government is moving towards further easing, including possibly further weakening of the Great British Pound. We believe this is the broad direction of travel for the HIDCs (Heavily Indebted Developed Countries)...

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28 February 2013

Weekly investor research

01 March 2013

The past week was characterised by severe bouts of volatility arising from actual and perceived risks in the HIDCs (Heavily Indebted Developed Countries). As in previous HIDC risk-off events, central banks in Europe and US were quick to step in with reassuring fresh money printing. Money printing helps as long as structural constraints...

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The Phony Currency Wars

The Emerging View

February 2013

Real or phony currency wars? We look at the facts and discuss the recent currency volatility.

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21 February 2013

Weekly investor research

21 February 2013

Last week’s sharp market reaction to the Fed Minutes illustrates the extreme dependence on monetary stimulus in the HIDCs (Heavily Indebted Developed Countries)

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14 February 2013

Weekly investor research

14 February 2013

The rally in global markets is driven more by sentiment and positioning in HIDC currency markets than fundamental strength as the growth outlook in Europe and the United States remains very weak. As such, this is a reluctant and fragile rally and we believe investors should position to buy Emerging Markets into any weakness arising...

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07 February 2013

Weekly investor research

07 February 2013

Markets traded erratically due to perceived rising risks in the financial and political spheres of Europe as downside risks to currencies in HIDCs (Heavily Indebted Developed Countries) continue to become more evident.

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31 January 2013

Weekly investor research

31 January 2013

A sudden 20 basis points jump in treasury yields is creating some divergence in performance across asset classes. Equities have, for the most part, continued their march upwards and are out-performing credit. With global growth picking up and the most immediate policy risks (e.g. debt ceiling) being pushed back, the habitual ‘risk-on...

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Market Prospects 2013

Yearly View

24 January 2013

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24 January 2013

Weekly investor research

24 January 2013

Emerging Markets growth is set to rise in 2013. Policy makers in the growth-challenged HIDCs (Heavily Indebted Developed Countries) are however becoming increasingly focused on currencies as the World Bank and the IMF predict another year of HIDC sub-par growth. Global sentiment improved marginally as the US Congress agrees to push...

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17 January 2013

Weekly investor research

24 January 2013

The clouds are gathering over global currency markets. So far we are only seeing minor skirmishes in a phony currency war. The outbreak of serious hostilities is further down the line. We believe it is the time to begin to accelerate the exit from HIDC (Heavily Indebted Developed Countries) bonds and currencies in favour of safer...

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10 January 2013

Weekly investor research

10 January 2013

Markets consolidated the current levels after the sparkle of the first week of the year. S&P500 is flat at 1,460 levels, 10yr UST inched up to 1.88%, Euro is flat at 1.31. Emerging Markets retraced a little from last week with Local Currency down -0.3%, Local Currency Bonds down -0.4% and External Debt down -0.3%, however, Corporate...

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3 January 2013

Weekly investor research

04 January 2013

The week was dominated by the ongoing debate in the US on the postponement of the fiscal cliff, which was due to trigger on 1 January 2013. Whilst a solution has not been reached, both parties agreed to push back the effective date to 1 March 2013, giving them time to reach an agreement. This news provided a strong boost in Global...

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20 December 2012

Weekly investor research

20 December 2012

Global market sentiment was choppy due to lingering uncertainty about the US fiscal cliff issue. Still, Emerging Markets sovereign debt produced small positive returns, despite a sell-off in US treasuries. Higher spread corporate high yield debt rallied more, up 44bps since Friday last week. Emerging Markets currencies also rose...

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2012: A Lesson in Value Investing

The Emerging View

December 2012

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Convergence In The Time of Imbalances

The Emerging View

November 2012

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29 November 2012

Weekly investor research

29 November 2012

The economic outlook continues to brighten globally, though asset markets continue to be beholden to fundamental weaknesses in Europe and the United States. In the past week, Greece was granted de facto debt relief on official sector debt—with resulting losses to European tax payers. The market then turned its attention back to...

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22 November 2012

Weekly investor research

22 November 2012

Happy Thanksgiving! Global market sentiment generally improved over the past week as news out of Europe and the US got slightly better at the margin. However, the HIDCs (Heavily Indebted Developed Countries) remain extremely vulnerable economically and face very tough challenges, so sentiment can quickly change again. Current drivers...

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15 November 2012

Weekly investor research

15 November 2012

Global market sentiment continued to be very volatile leading into the year-end on account of the ‘fiscal cliff’ issue in the United States, rising tensions in the Middle East due to the situation in Syria, and slow progress in Europe in dealing with Greece and Spain. The problems in the HIDCs generated collateral volatility...

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8 November 2012

Weekly investor research

08 November 2012

Emerging market bonds and equities both rallied over the week and currencies were flat to slightly down against the US Dollar. Markets in general have been choppy, with profit taking before year end, a bearish element in US markets, Hurricane Sandy and US election and fiscal cliff. HIDC data has been positive recently, but deleveraging continues....

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Blended Debt: Enhance Returns and Reduce Risk

The Emerging View

October 2012

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Bernanke Signals Dollar Weakness Ahead

The Emerging View

September 2012

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Phoney Currency Wars

The Emerging View

August 2012

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Liabilities & Purchasing Power

The Emerging View

July 2012

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Passive

The Emerging View

June 2012

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The Great Flight From Liabilities

The Emerging View

May 2012

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How to Lose Money Without Really Trying

The Emerging View

April 2012

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Benchmarks: Lessons not learnt

The Emerging View

March 2012

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The Ugly Duckling Grows Up

The Emerging View

February 2012

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Prejudice, Value and Opportunity

The Emerging View

January 2012

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Market Prospects 2012

Yearly View

18 January 2012

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Engage that First Bullet now

Market Commentary

29 September 2011

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