The crisis in emerging economies gets little attention.
The rout has continued over the summer but has been shrugged off by investors in the West and US and European markets have gone up.
Economic problems far away do not grab headlines but investors should not underestimate the risks to global growth. The coming months will see companies warn of problems in what were thought to be fast-growing markets. Global growth forecasts will be revised down and investors should be prepared.
Money-printing in the West has helped restore confidence and lift stockmarkets. Consumer confidence is recovering in the UK and Europe, with a further recession averted. But much of the printed money has flown into the wrong areas; house prices in London are up 7% over the past year. Some of the money has flown into emerging markets, in a search for growth and stability, creating a property bubble across Asia.
The wave of newly printed money led to a broad emerging market boom, sucking in private and institutional investors alike. Over the past 10 years, emerging markets have outperformed global averages. But the long term record of emerging markets shows recurring economic crises and greater volatility - as shown by the 1997 Asian economic crisis.
The flow of western capital into emerging economies has typically forced imbalances in current accounts.
A number of economies have lost competitiveness, with fading productivity gains, over-priced currency and property, and excessive inflation. India, a prime example, is one of the worst hit in the current crisis. Now it has been joined by others; Indonesia, Philippines, Malaysia, Brazil, South Africa and Turkey. Investors are hit as currencies fall, and stockmarkets collapse.
The responses to this will have consequences for western investors. India and Indonesia have set import controls that will hit sales of some luxury goods, such as cars. Others have raised interest rates to defend their currency, which will cool their economies.
More likely these currencies will simply be allowed to settle down to a level at which competitiveness returns. This will devalue the earnings that western companies, such as Unilever, get from their emerging market exposure. It may seem like a short-term crisis but has the potential to hit western companies. And the higher oil price will further cut global growth and squeeze availability of dollars globally.
To date, the outflows from emerging markets have largely been from institutional investors. Private investors are likely to follow, particularly if any of the problem countries ultimately appeal to the International Monetary Fund for support. So far, there is little guidance from most of the investment managers of emerging markets funds.
Investors are likely now to focus on more domestically oriented UK businesses. The pound may have risks, but looks stable compared with some emerging economy currencies. There are worse places to be than invested in some of the larger consumer-oriented businesses in the UK and Europe.
l Colin McLean is managing director, SVM Asset Management
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