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20 Jun 2013
Flash: Emerging markets landscape different from past – Goldman Sachs
FXstreet.com (New York) - If Emerging markets assets upside are more limited, how does the downside look? – “The good news is that these are not your father’s emerging markets either.” notes the Economics Research Team at Goldman Sachs.
Sovereign leverage is generally lower, only a handful of countries are running large current account deficits and fiscal positions are generally on a sounder footing than in much of the developed world. So the EM crises of the 1980s and 1990s are also not the likely template. However, as we have argued over the past year, macro policy challenges for many emerging economies have become more acute and significant economic adjustments may lie ahead.
“A long period of strong performance also means that investors have built up greater exposure to these markets than in the past. So we think the skew of potential returns in many EM assets has become more negative and differentiation across the group more important, more like the EM landscape before the last decade.” the team adds.
Sovereign leverage is generally lower, only a handful of countries are running large current account deficits and fiscal positions are generally on a sounder footing than in much of the developed world. So the EM crises of the 1980s and 1990s are also not the likely template. However, as we have argued over the past year, macro policy challenges for many emerging economies have become more acute and significant economic adjustments may lie ahead.
“A long period of strong performance also means that investors have built up greater exposure to these markets than in the past. So we think the skew of potential returns in many EM assets has become more negative and differentiation across the group more important, more like the EM landscape before the last decade.” the team adds.