There been lots of talk, about emerging market investing, & many old hands will point to higher risks with emerging markets, and why, with that risk, emerging markets is not for everyone. Even emerging market guru, such as Mark Mobius, is know to do badly, investing in emerging markets, i.e. investing heavily into Thailand, right after the 2014 coup, with a great many positive words for Thailand after the coup & look at Thailand’s stock market now, going no-where since the coup, with extremely high volatility.
And the latest news is that Mark Mobius is retiring from active, day to day, investment decisions, management of Templeton, but would still look over the big picture. Mobius, perhaps learning his lesson about emerging market with China’s stock market crash & Thailand’s stock market going nowhere, said after the China stock market crashed, he was cautious about emerging markets.
In fact, not only Mark Mobius that got burned investing in emerging markets, other stock market guru were also burned, i.e. Morgan Stanley, the globe’s largest holder of investment fund, also said about the same thing Mark Mobius did on Thailand. And with the China stock market crash, a historically high amount of funds, from globe over, left emerging markets.
For 2015, so far, about US$3 billion in foreign investor money fled the Thai stock market and in November so fsr, about US$ 100 in foreign money fled the market.
A surge of capital gushing out of emerging markets has risen toward $1 trillion over the past 13 months, roughly double the amount that fled during the financial crisis amid slumping confidence in the world’s developing economies.
In fact, in 2015, the sustained exodus of capital reinforces concerns that emerging market economies, suffering slowing growth and weakening currencies, are giving up their longstanding role as locomotives for global growth to become a drag on demand instead.
China is currently, on an artificial re-bound, based on China’s government subsidizing and manipulating the market for a bull momentum. Meanwhile, as global investors bail Thailand, the local stock market investment fund bought into the market, recently, because of tax-savings, related to these fund offer to investors, near the year end, so also like China, an artificial, bull move.
But what, in fact, is the problem with risk, in investing in emerging markets about?
The other day, I saw an article by Bloomberg, that slow growth in emerging economies, might be related to structural deficiencies (1)
after reading the article, I thought of the subject reforming the economic structure & did research on subject (2)
& the research lead me all over the place, but particularly interesting, was the interlink, between political reform & economic reform (3)
of course, political reforms and economic reforms issues, are issues that not only about developing economies, but advance economies too (4)
So came to mind, is the political-economy of Europe, where reform for competitiveness is infused with deep concern for the humanities (5)
So came to mind, is the political-economy of the US, where money has so deeply infused into politics, deeply hurting the humanities (6)
But u know, when I researched the political-economy structural problems of emerging economies vs those of advance economies (7)
If I was an investor & I am a medium to long term investor, I would put my money on advance economies, as the political-economy of (8)
developing economies, is really back-ward and problematic, like that Bloomberg article says, developing economies problems (9)
are structural & I am in Thailand & so, i.e. Thailand’s economic head, just announced that Thailand, will now stress reform (10)
But news today is also, that Thailand’s official anti-corruption body, will, more, go after the coup ousted government, for corruption (11)
The problem is, Thailand’s official anti corruption agency, is rated by the globally respected Political & Economic Risk Consultancy (12)
as “Boo” meaning horrible & gave it a score, at the bottom in Asia, and said the unit is “Politicized” (13)
& u know, as Thailand’s military government economic head, is now stressing reform of the economy, on average, there is a coup (14)
or attempted coup in Thailand, every 3 years & a new constitution every 4 years & can u imagine, all the instability, all those (15)
coups & constitution brings to Thailand, as i.e. in one event, before the 2014 Bangkok’s mostly Neo Fascist Royalist Elite, destabilize (16)
Thailand for a coup & then the coup, GDP was estimated at 2% to 3%, but with the destabilizing & coup, 2014 GDP ended at less than 1% (17)
& again, this is just one destabilizing & one coup, costing Thailand’s economy, in GDP terms, billions & trillions in US$ (18)
I do not think it is fair, to say Thailand is representative of political-economy, of developing economies, but clearly, developing (19)
economies, most of them, have elements of Thailand’s problems, more or less, with all of them (20)
I like that Bloomberg article, on the structural limitation to growth & development, at emerging economies, & if I were to add (21)
anything, for investors, I think investing in emerging economies, is not really about company profits & growth prospect, as the political-economic structure, is just too weak, causing risk & volatility, that juts makes the whole thing efforts, pointless (22)
my suggesting is, if u spot an emerging economy, that is getting its act together, on political-economy, buy into the country (23)