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Investors Dove Back in to Emerging Markets Last Month |
By Chelsey Dulaney
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Morning MoneyBeat is the Journal’s pre-market primer. To receive the newsletter via email, click here.
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Market Snap at 04/02/2018 08:33:23 AM ET
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S&P 500 Futures -0.38%
↓ 2633
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DJIA Futures -0.5%
↓ 24026
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U.S. 10 Year -7/32
↑ 2.764%
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WSJ Dollar Index -0.08%
↓ 83.68
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Crude Oil 0.51%
↑ $65.27
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Gold 0.76%
↑ $1337.40
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Europe
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Asia
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Overnight Developments |
The Breakfast Briefing
The volatility that rocked global markets in March didn’t scare investors away from emerging markets.
In
a month during which the Dow Jones Industrial Average slid 3.7% and the
S&P 500 fell 2.7%, investors snapped up stocks and bonds of nations
such as South Africa and Brazil, according to data from the Institute
of International Finance. The MSCI Emerging Markets Index fell just 2%.
The demand for emerging-market assets marks a divergence from past periods of market turmoil; emerging markets were often the hardest hit because of the belief among many investors that they were risky plays.
In January 2016, when global markets were rocked by concerns about oil
prices, a possible China hard-economic landing and global growth, MSCI’s
benchmark emerging-market stock index tumbled 6.5%, outpacing the Dow’s
5.5% decline.
That
dynamic was also on display earlier this year as a selloff that began
in U.S. stocks in early February quickly rippled across the globe.
Investors pulled billions out of emerging market assets in February,
according to IIF data, with the heaviest flows out of China, Thailand
and Poland. The outflows dented the big gains that emerging-market assets have seen over the past few years as economic growth has improved.
But
investors warmed back up to emerging markets in March despite the
persistence of market volatility. An estimated $7.6 billion flowed back
into stocks and bonds, according to IIF data.
IIF
described the inflows as “modest” and noted it was one of the weakest
month of inflows for emerging markets since November 2016. And
while many emerging-market stocks did hold up better than their U.S.
counterparts last month, their gains--if any--were small.
South Korea’s Kospi index edged 0.8% higher, while Brazil's Bovespa was flat in March.
And
some analysts warn against a “relatively rosy consensus” view of
emerging markets. Capital Economics analysts recently said that emerging
markets are facing a number of risks such as the threat of protectionist global trade policies.
Yet
there are factors weighing in emerging markets’ favor. Emerging markets
are experiencing their the strongest pace of growth since 2011,
according to IIF.
Most important, the embrace of emerging markets in March illustrates how investors are beginning to decouple their outlook for those countries from the U.S. and the broader risk backdrop.
Are you optimistic about emerging markets? Let the author know your thoughts at chelsey.dulaney@wsj.com.
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