Emerging Market Contagion Goes Global As Fund Outflows Spike Most In Over 4 Years

Despite promises from various foreign officials that just a little more intervention and just a few more billion in bailouts from Lagarde will 'fix' the "short-term speculator-driven" crisis in Emerging Markets (even as Brazil admits failure), things are escalating way beyond the idiosyncratic fears of Argentina and Turkey...

As investors Emerging Markets' anxiety spreads globally with ETF outflow across all EM ETFs soaring to the highest since Jan 2014...

In fact, as Bloomberg reports, outflows from U.S.-listed exchange-traded funds that invest across developing nations as well as those that target specific countries totaled $2.7 billion in the week ended June 15, the most in over a year and more than seven times the previous week.

The 'baby' is being thrown out with the 'bathwater' as even countries with solid prospects for growth and debt financing haven’t been immune to the selloff. South Korea and Thailand, which have current-account surpluses, are among the six-worst emerging currencies this month.

“The statistics itself reflect worries about emerging markets in terms of the growth outlook, in terms of what the Fed tightening means,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd.

“We’re starting to see a blurring of the differentiation between current-account deficit currencies and current-account surplus currencies. That reflects the worries about trade-war jitters.”

The last week has seen derisking everywhere...

Seems like EM stocks have a long way to fall...

 

Comments

TGF Texas Tue, 06/19/2018 - 13:48 Permalink

America is taking her industry back, and imposing "fair trade" polices world wide. No more, "friendly diplomacy", in exchange for favorable trade deals. 

 

Toxicosis TGF Texas Tue, 06/19/2018 - 13:59 Permalink

So tell me when the first toilet seat, fishing rod, nike shoe, and personal computer factory re-opens in the U.S.  And then let me know the cost per item.  I'm afraid most aren't buying Jack that's been homemade.

 

 

In reply to by TGF Texas

Snaffew Quantify Tue, 06/19/2018 - 14:27 Permalink

Israel is far ahead of the United States for Industrial manufacturing and production and they have less than 9 million people...so the US makes a few fishing rods---big deal....that's not, nor has been the bread and butter of this country for over 70 years.  In this day and age of automation and robotics, productive capacity won't involve humans other than engineers, software and mechanics.  Do you really want America to go back to looking like the opening scene of Laverne and Shirley putting gloves on Schlotz beer?

In reply to by Quantify

Toxicosis TGF Texas Tue, 06/19/2018 - 15:07 Permalink

Thus corporations have reduced their costs again and abandoned the human worker.  First it was Mexico, than China, than Asian countries generally, and now automation.  Jobs are not coming back to North America, as government is more than happy to green light the ability of a corporation to make money but not employ human workers.  That is why I made my comment above.  Jobs are not coming back for many reasons.  Costs and energy being the primary two.

In reply to by TGF Texas

shortonoil TGF Texas Tue, 06/19/2018 - 14:06 Permalink

Mr. Powell is doing a great job; he is funneling boatloads of money from the EM to the DE just like he was instructed to do. And, it as so easy to do! Just drive oil prices $20 higher than the economy can afford, and boost interest rates a few bases points. Whammy, all those foreign investors come running home to papa, dragging their hot loot behind them. Of course, when this starts WWIII they'll deny every part of it. What in the world would we do without Central Bankers? To find equally as good a scum we would have to wade through the Okefenokee.

In reply to by TGF Texas

Snaffew TGF Texas Tue, 06/19/2018 - 14:09 Permalink

it would take 20 years and a helluva lot of labor price concessions for America to take her "Industry" back.  The last time America had competitive industry was WWII.  It takes decades to build an industrial platform and that is the last place America wants to try and compete.

In reply to by TGF Texas

ParkAveFlasher Tue, 06/19/2018 - 13:52 Permalink

Chinese debt holdings of UST essentially a dollar peg choke-point for all those countries involved in supplying the US market.  The bathtub is big and hard and shiny, but the plug is just a tiny thing.  Go ahead and yank on it!

TGF Texas taketheredpill Tue, 06/19/2018 - 14:05 Permalink

Likely it's Chinese shell companies in SK and Thai, that are getting exposed and shut down due to tariffs on China. 

Why do you think Trump went after NAFTA? The China shell companies operating in Mexico, and avoiding any and all tariffs and taxes that would be imposed on China's direct imports. 

Prior to 2016, a common joke down here, Texas, was, "Made in Chexico"

In reply to by taketheredpill

Number 9 Tue, 06/19/2018 - 13:58 Permalink

timmmmmberrrrrrrr!!

Hang Seng lost 834..

exactly what happened in 2007/08 when she broke..

the question is can the ppt and fed throw enough money at this thing to reverse it and also is it time they decide to pull the plug..

EVERYONE be it JPM, Goldman, Ron Fvkn Paul is screaming "crash"..

The warnings have gone out, if you get killed being a bull it is your fault..

shortonoil Number 9 Tue, 06/19/2018 - 14:35 Permalink

Why in heavens would they want to stop it? It is driving $trillions right into the waiting arms of the Western banks. It is the end of the oil age, and from here on out the game is who will be the last man standing. Personally, I'm betting on the Russians if the MIC doesn't try to blow them up first. For their own good that Russian Bear had better have some real teeth!

In reply to by Number 9

HRH of Aquitaine 2.0 Number 9 Tue, 06/19/2018 - 17:45 Permalink

Really? Interesting. "If you get killed being a bull . . ." good saying! People can laugh, but Uranus moved into Taurus on May 15th. The numbers have been crazy anyone paying attention knew this was going to come to an end. The bull has woken up and he isn't happy! BTW, Taurus governs agricultural products (it's an earth sign) and PMs. I am betting that India is going to regret putting tariffs on US lentils. They could end up with mass riots due to excessive price inflation for food products, and it is my understanding that lentils are a staple for many Indians. Making food staples expensive never works out. Unless you want people to starve or riot or both. I see silver has been stomped down, again. Good time to buy another 100 oz. bar!

Excellent essay about this particular planetary transit, published in 2015: https://shanepward.blogspot.com/2015/04/uranus-ingress-into-taurus-2018…

In reply to by Number 9

jm Tue, 06/19/2018 - 14:13 Permalink

2Y or 10Y.  That is the question.

You are picking up less than 50 bps for the term premium. I can't imagine a Fed selling $40 billion in securities a month not able to manage the curve as it sees fit in the near term.

 

  

Salmo trutta Tue, 06/19/2018 - 15:42 Permalink

There's a fake news competition in laxity.  Money flows dropping by 30 percent from Jan. to Jun. this year.

Money flows dropped by 80 percent from Jan. 2013 to Dec. 2015 (that's why oil fell).

Borrowing dollar denominated assets assumes both a (1) currency risk and a (2) rate and credit risk.

Buyer beware.