Are Emerging Markets So Bad They’re Good?

Already battered emerging markets stocks and currencies may face the specter of further outflows, but some analysts are tipping they've become the Mystery Science Theater 3000 of assets: So bad they're good.  In emerging markets, "you don't have earnings growth, ROEs (return on equity) are continuing to decay (and) forex volatility is against you. It's not the best of pictures," Bhaskar Laxminarayan, Pictet Wealth Management chief investment officer for Asia, said at a press conference last week.

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New Emerging-Market Woes

One of the last havens in emerging markets is showing signs of strain.  Companies in emerging markets issued trillions of dollars of foreign-currency bonds during the decade long commodity boom, and took advantage of low interest rates in the developed world following the 2008 financial crisis. Now, many investors fear the commodity bust will lead to a rise in defaults that could deepen economic slumps in many of these nations.  Until a few months ago, emerging-market corporate bonds were regarded as a haven amid the routs that had hit stocks and currencies in many developing countries because the bonds are typically issued in the U.S. dollar and by companies with robust growth and credit profiles.

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Yellen Nomination Positive for Asian Economies

Plans by the White House to nominate Janet Yellen to lead the U.S. Federal Reserve are good news for Asian economies. Stocks and currencies across the region were battered this summer due to concerns the Fed will soon begin pulling back on an extraordinary monetary stimulus program that has buoyed global markets.

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