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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. Meanwhile, in Russia the Central Bank put in place contingencies in the event of a Fed-induced global credit crunch. India did exactly the opposite as the Reserve Bank of India (RBI) tightened liquidity in the domestic market. It is the slow pace of reform in India which is making the RBI dish out tough love. In contrast, the Chinese government is pushing ahead with reform at a furious pace which is only constrained by the need to avoid too sharp a slowdown in economic growth during the transition. We will write more about the other 61 countries in future issues.

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