Emerging Markets: 7 February 2014

When measured in US dollars, the stock market performance of the emerging markets has suffered a lot over the past 12 months (top half of the chart below). Asian stock markets have fallen -15.6% in that time, while the Middle East has declined -17.2%. The weakest performing countries have been Indonesia (-32%), Turkey (-23%), South Africa (-20%) and Brazil (-16%). A significant portion of the decline has been currency related. As you can see, the stock market performance in local currency terms (bottom half of the chart below) has been far less dramatic. 

 

Focusing on the emerging market currencies, the Argentinian peso has declined -38% in the last 12 months, while the Turkish Lira and Indonesian Rupiah have fallen in excess of -20% year/year. This currency crisis, well underway in the emerging markets, has been an unintended consequence of central bank money printing on a record scale. The crisis is accelerating and I expect it to reach the developed world currencies later in the year.