emerging markets news
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The IMF's Change on Capital Controls Adds Danger for Emerging Market Investors
The IMF is up to no good again.
On Monday they released a new report on international capital flows which relaxed its opposition to exchange controls.
By doing so, the IMF has now made emerging market investments more risky, especially for retail investors.
What's more, they likely imposed a major new cost on the global economy.
The irony is that the IMF is trying to solve a problem that was caused by foolish global monetary policies. Relaxing its opposition to capital controls is just more of the same.
Removing Federal Reserve Chairman Ben Bernanke and his world-wide sympathizers, and restoring a true free global capital market would work much better.
The IMF does correctly note that capital flows have vastly increased in recent years. That's where the initial problem comes from. It's the solution that's dangerous.
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Emerging Markets Stocks 2013: Don't Miss These Next Waves of Growth
Amid a turbulent market environment in 2012, emerging markets stocks have been, well, turbulent.
Some markets (Colombia, Mexico and Thailand to name a few) have performed well. Others have disappointed (Brazil and Russia stand as two laggards.)
But as Money Morning Global Investing Strategist Martin Hutchinson explained last week, economic growth has shifted to these developing economies.
"The IMF's World Economic Outlook projects anemerging marketsforecast with growth at 5.6% in 2013. That's down slightly from 2011 but far ahead of the measly 1.5% growth projected in the "advanced economies,'" wrote Hutchinson in his 2013 emerging markets forecast. "That means investors need to focus heavily their investments inemerging markets, as we have done successfully over the past few years."
Plus, there is no getting around the fact that emerging markets stocks are cheap. The broader emerging markets universe currently trades at a 20% discount to the developed world. And with that valuation discount comes the potential for growth.
But just because valuations are attractive that does not mean all emerging markets stocks are. It pays to be hyper-selective with this asset class.
That's why we've weeded out the weak and come up with some of the most promising emerging markets stocks for 2013.
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Emerging Markets Provide Blueprint for Sustained Growth
The United States should look at emerging markets for clues on how to sustain economic growth, according to U.S. Federal Reserve Chairman Ben S. Bernanke.
While the advanced economies of the world have stagnated since 2008, countries like China, Brazil and parts of Southeast Asia have enjoyed growth rates in the 7% to 9% range. Although several have slowed this year, they're still faring better than the economies of the United States and Europe.
"Advanced economies like theUnited Stateswould do well to re-learn some of the lessons from the experiences of the emerging market economies,"Bernanke said in a speech delivered yesterday (Thursday) at a Cleveland, OH forum.
Specifically, Bernanke attributed growth in emerging markets to "disciplined fiscal policies, the benefits of open trade, [and] the need to encourage private capital formation while undertaking necessary public investments."
The so-called advanced economies certainly could benefit from more fiscal discipline. Decades of profligate government spending have created debt problems that are crippling those economies.
In the United States, which has the world's largest debt at $14.7 trillion, the issue triggered a political crisis over the debt ceiling this past summer that roiled stock markets. Although the United States is unlikely to default, the growing debt - 98% of the nation's gross domestic product (GDP) -- hangs over the economy, hindering growth.
In Europe, the situation is far worse. Greece has been teetering on the edge of default for more than a year. It's been sustained only by the flow of bailout money from stronger European Union countries like Germany.
Greece isn't alone, either. Countries like Italy, Ireland, Portugal and Spain also have dangerously high sovereign debts. The crisis has hobbled the economy of the entire European Union (EU), with no end in sight.
One of the main reasons many emerging economies have thrived is that they have avoided the rampant deficit spending that created the crippling debt in the advanced countries.
And because they haven't been struggling, most emerging market economies have much greater flexibility in their monetary policy - they have leeway to lower interest rates - to cope with the current global slowdown.
Bernanke noted that emerging markets account for more than half of total economic activity today, up from less than one-third in 1980.
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