Bloomberg the Company & Products

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

U.S. Taper Bigger Threat Than Ukraine, $75 Billion PFA Says

U.S. Taper Bigger Threat Than Ukraine
Since the Fed signaled last year it may start to withdraw some support, investors have sold out of high-yielding asset classes. Photographer: Andrew Harrer/Bloomberg

March 5 (Bloomberg) -- Investors in emerging markets are more at risk from a badly timed exit from monetary stimulus in the U.S. than military unrest in Ukraine, according to Denmark’s biggest commercial pension fund.

PFA Pension A/S, which manages more than 400 billion kroner ($75 billion) in assets, predicts the turmoil in Ukraine will be over within a few weeks. While the events unfolding on Europe’s eastern frontier have jolted markets this week, investors should pay more attention to signals from the Federal Reserve on how quickly it will unwind stimulus measures, according to the Copenhagen-based fund.

“If the tapering is mistimed, this could have a much more significant negative effect on emerging markets compared with this conflict,” Henrik Henriksen, chief investment strategist at PFA, said yesterday in a phone interview. “We actually think that 2014’s biggest threat for emerging markets is the pace of the Federal Reserve tapering.”

Since the Fed signaled last year it may start to withdraw some support, investors have sold out of high-yielding asset classes. Federal Reserve cuts in monthly bond purchases in December and January were matched by a 8 percent decline in the MSCI Emerging Markets Index in those two months alone. The index rose 0.4 percent as of 12:31 p.m. in London.

Putin’s Retreat

European stock markets rose yesterday after President Vladimir Putin said there’s no immediate need for Russia to invade eastern Ukraine, signaling a retreat from plans to use military force.

“We’re obviously monitoring the situation,” Henriksen said. “There’s a risk that the situation can get out of control, but our main scenario is that this won’t escalate into a full-scale military conflict. That means that for the markets, this could be over in a matter of weeks and then the risk premium that’s on these assets will be reduced.”

Henriksen said PFA has been underweight eastern European stocks for “a couple of years,” meaning it holds less of the shares than its benchmark. “We chose to go underweight because we need reassurance on growth rates in these emerging markets. If the markets keep falling we may change that position as assets may become cheap, but we’re not at that stage yet.”

To contact the reporters on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net; Peter Levring in Copenhagen at plevring1@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net; Tasneem Brogger at tbrogger@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.