Stock markets in developing countries have risen about 90 percent over the past 12 months and reached historic highs during the week of 19 February, according to MSCI’s index of markets across 27 nations.
Now, however, investors’ relentless hunt for higher returns has pushed bond prices up.
Those higher yields have helped to knock down the MSCI index by 5 percent and now are pressuring those high-debt countries with higher bond payments.
China’s closely-watched CSI 300 index has dropped 6 percent from its February high, and the country’s tech-centered ChiNext market has lost 13 percent. Turkey’s stock market has shed 8 percent since 15 February, MSCI data shows.
“There’s no doubt that yield curve steepening worldwide is starting to spill over into other asset markets,” currency strategist Win Thin at Brown Brothers Harriman said to the Financial Times.
“The last thing we need is a full-blown bond and equity-market sell-off,” he added.
The pullback in emerging markets’ equity prices has reminded some analysts of 2013 when investors fled those nations after the U.S. Federal Reserve said it would end extra-loose monetary policies it had imposed during the Great Recession.
TRENDPOST: How well countries survive the current market shift will depend on their ability to continue to deliver returns not based on speculation. Africa and Latin America lost direct foreign investment according to the FT, thus their economies still struggle with long-term structural obstacles present before the pandemic began.
