Hedge funds pessimism over EMs mounts - FT


FXstreet.com (Bali) - The Financial Times has published an article raising retail market awareness on the gloomy perspective towards emerging markets by hedge funds, noting the selling seen so far might be only in its early stages.

Bad augurs from the hedge fund community

The Financial Times quotes Mike Riddell, a bond fund manager at M&G Investments, saying: "Be afraid. China is trying to hit unsustainably high GDP [gross domestic product] growth rates by generating bigger and bigger credit and investment bubbles. Its economy is becoming progressively unhinged, and it’s hard to see how it won’t end badly."

FT also cited Richard Titherington, CIO of emerging market equities at JPMorgan Asset Management, noting: "Emerging market equities have been a big disappointment for some time and going into 2014 we see a degree of pessimism about the asset class that we haven’t seen for many years; the big risk in 2014 in emerging markets is currencies and how they react to the macro environment.”

Michael Howell, managing director of London-based CrossBorder Capital, was also quoted by the FT, saying: “Looking ahead, the outlook remains poor as far as we see it. In contrast to 15 years ago, most emerging market economies are now dependent on the Chinese economy rather than on the currently more dynamic US economy.”

Meanwhile, according to Reuters, the retail community appears to have been the main sellers so far in emerging markets, with institutional money growing uncomfortable on its EMs-related holdings, it is thought.

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