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Wednesday, June 18, 2014

Performance Chasers Come Back to Emerging Markets...Not Surprising

Below is a graph of the  last 3 months of performance in emerging markets in the chart below for SPY (S+P 500) in blue .GMF (emerging asia) in gold and IEMG  (overall emerging markets) in green (growth of $100,000) with both the emerging market indices up  a bit over 9% more than twice the return of the S+P 500 at 4.3%/

Thus it was not surprising to see this article in the WSJ

Flows Return to Emerging Markets
Investment Flows Take Pressure Off Emerging-Market Governments
MICHAEL S. ARNOLD in Hong Kong, 
PATRICK MCGROARTY in Johannesburg and 
EMRE PEKER in Istanbul 
Updated June 17, 2014 1:29 a.m. ET
A fresh wave of investment inflows is taking the pressure off some emerging-market governments that had at long laststarted to tackle economic overhauls.
As investors fled from developing markets around this time last year, in anticipation that U.S. interest rates would climb when the Federal Reserve reined in its stimulus measures, central banks in Turkey, Brazil, India, Indonesia and South Africa raised rates to stanch capital flight and many nations promised tough economic measures to restore confidence.
Investment flows have since reversed, sparked by bets that interest rates will remain near zero in the West well into next year. That has allowed emerging-market nations to defer hard policy choices and could hold back world economic growth.
Investors pulled $32.5 billion out of stocks and bonds of 30 emerging markets in June 2013, the height of market turmoil, according to the Institute of International Finance Inc. Political upheaval in Ukraine in January led to a further bout of outflows.

But investors have pumped $221.7 billion into emerging assets over the past 11 months, including an estimated $45 billion in May, the highest monthly total since September 2012.

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