Emerging Markets Face Reckoning as Economic Clouds Darken

  • Date: 30-Jun-2020
  • Source: Business Live ME
  • Sector:Financial Markets
  • Country:UAE
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Emerging Markets Face Reckoning as Economic Clouds Darken

Emerging Markets Face Reckoning as Economic Clouds Darken



(Bloomberg) “” A disconnect is growing in emerging markets, which have rarely faced such dire economic conditions and yet whose assets are about to round out their best quarter in a decade.

The MSCI Emerging Markets Index is on track to post its best quarterly gain since 2010, while dollar bonds are poised for their biggest quarterly advance since the 2009 recovery from the global financial crisis. The tidal wave of central-bank stimulus sweeping the world has supported risk appetite.

Emerging-market currencies are up about 2% in the past three months, with the Indonesian rupiah, Russian ruble and Colombian peso leading gains. Capital flows are showing a "modest return“ after outflows in early 2020 dwarfed those of prior crises, according to a June 24 report from Institute of International Finance.

All of that is at odds with the downbeat outlook, especially for Latin American, South Asian and African economies, where virus outbreaks risk spiraling out of control. The IMF's latest projections show that while China could eke out growth this year, Mexico, Argentina, Brazil, and South Africa have each been marked down to a contraction of 8% or greater.

The yawning divide between market gains and economic gloom risks a snapback