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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 our view, that the flashpoints in Russia-Ukraine will have adverse implications for the rest of EM. The bigger risk, in our view, is the ever greater concentration of exposure by central banks to US treasuries. Central banks now hold more than 50% of US treasuries.

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