Brexit Effect Ripples Through Emerging Markets

Britain’s vote to leave the European Union continued to hurt emerging markets on Monday, sending currencies and stocks falling from Mexico to Poland as investors fled riskier assets.  The declines highlight how Brexit is causing ripple effects across the world, raising uncertainty about global growth and pushing investors into assets they see as safe, such as the U.S. dollar. The dollar’s gains then feed back into concerns about emerging markets, making their greenback-denominated debt and the commodities they sell more expensive.

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India Outshines Emerging Markets

Since Raghuram Rajan took over as RBI governor on September 4, 2013, Indian equities have been the best performer among all emerging markets. 

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Emerging Markets Led Overall Market Performance

Global equity markets, represented by the MSCI AC World Index, closed with a gain of 0.62 per cent for the week ended June 3, 2016.  As a whole, emerging markets outperformed developed markets as the MSCI Emerging Markets and the MSCI Asia ex Japan indices closed with larger gains of 1.37 per cent and 1.28 per cent respectively.  Among developed markets, Japan emerged as the best performer, with the Nikkei 225 index closing 2.21 per cent higher.  The US, represented by the S&P 500 Index, registered a gain of 0.39 per cent while the Stoxx 600 Index ended the week 0.34 per cent lower.

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What Is an Emerging Market?

In April this year, the World Bank released its 2016 edition of World Development Indicators, and for the first time, it stopped classifying countries as "developing" and "developed." According to the organization, the distinction was no longer relevant, as it aims to use a set of sustainable development goals that can be applied to all countries.

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