Poll: Investor Confidence Over Emerging Markets Plunges
The BRIC markets are seen as some of the worst investment choices right now according to the results a poll conducted by Bloomberg, the news agency reports. The country chosen as the worst place to invest money right now was India, followed by Brazil, Russia, and China. This represents a turnaround for these countries, who, a short time ago, were seen as some of the best opportunities by investors as cash flocked in to the emerging powerhouses.
What has changed since then is the introduction of fears about the American Federal Reserve tapering their policy of quantitative easing, which is set to be discussed at a meeting of the Fed next week. When quantitative easing is in full force, dollars are cheap, leading investors to put money into emerging markets because they have access to so much inexpensive capital.
However, expectations over rising interest rates and the end of quantitative easing have caused investors to pull out, which, in turn, causes currencies to sink in the countries when cash is withdrawn. Brazil, India, and Turkey have seen both dramatic decreases in the value of their currencies and dramatic increases in the interest rates of their bonds.
There was good news in the poll for the eurozone, which ranked as the second most favorable area to invest at the moment. For investors looking for a different option from the U.S., money is moving out of emerging markets and is set to be installed into European projects — which could prove just the right formula to help the area on the path to an economic recovery. Still, though, many are concerned about rising interest rates in Europe itself with the ECB using forward guidance by pledging to keep interest rates at their historic lows for an extended period of time to try and quell the market’s fears.
Respondents in Asia were especially unlikely to rate emerging markets as good investment choices, leaving only Japan in the east Asian sphere as a favorable investment opportunity to many respondents. It is the confidence of many of those investors, who would be most likely to invest in India or Indonesia if they felt secure doing so, that Asian governments must restore to reign in decreasing currency values and increasing interest rates.
A different Bloomberg post highlighted how most investors were not concerned about the Fed’s upcoming meeting impacting the market because they believe that the market has already taken into account the possible results of the meeting into its expectations. Certainly, markets in emerging countries have felt the power of market expectations long before the Fed will meet to actually discuss an end to quantitative easing.