Emerging Markets Are Down Hard but Not yet Out
- Local-currency bonds fall the most since 2008 financial crisis
- Currency volatility and hedging costs show no sign of panic
Emerging Markets: Is Now the Time to Jump In?
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The selloff in emerging markets after Donald Trump’s U.S. presidential election was intense. A closer look reveals that things aren’t as bad as they might seem.
While local-currency bonds suffered their biggest losses last week since 2008 following the Republican’s surprise victory, a gauge of volatility in developing-market currencies remained 16 percent below the levels seen in February. The cost to hedge against foreign-exchange losses is 38 percent cheaper than it was in August 2015 when China’s yuan devaluation rattled global investors.