Seeing opportunities in emerging market currencies



SEEING OPPORTUNITIES IN EMERGING MARKET CURRENCIES ANCHOR (OFF-CAMERA) ENGLISH SAYING: How else do you round out the asset allocation model that's ideal in your view? What else are you high on in terms of overweighting? CHRIS BRIGHTMAN, MANAGING DIRECTOR, RESEARCH AFFILIATES, (ENGLISH) SAYING: So, I think most investors have poorly diversified portfolios. They concentrate very heavily into traditional asset classes of US equities and investment-grade bonds, neither of which will do very well if we go into an inflationary environment, which is almost inevitable given the debt problem that we have. Investors need to build a third pillar of assets that will protect them in a reflationary or inflationary environment. Perhaps the most interesting opportunity is in emerging market local currency debt. The emerging markets have very low government debts, very strong and positive demographics, improving credit ratings. Every time you open the newspaper, you find another emerging market country is being upgraded whereas if you look at G20 traditional developed markets, every time you open a paper, there's a country being downgraded. And yet, we have negative real interest rates in the US, in the UK, in Japan, and there's positive real interest rates in most of the emerging markets. ANCHOR (OFF-CAMERA) ENGLISH SAYING: In terms of the EM area, can you define it a little bit more in terms of whether we're talking Asia or Latin America, et cetera? CHRIS BRIGHTMAN, MANAGING DIRECTOR, RESEARCH AFFILIATES, (ENGLISH) SAYING: I would say both that there are interesting opportunities in emerging market currencies in emerging Asia and in Latin America. Some also in Eastern Europe, Turkey for instance. Here you have countries again with these higher interest rates and long-term currency appreciation. Of course, there's going to be some volatility in holding foreign currencies but in emerging market countries, that long-term trend is appreciation. You are going to be having appreciating emerging market currencies, depreciating develop...

Comments


    Additional Information:

    Visibility: 78

    Duration: 2m 29s

    Rating: 0