Investors flee emerging markets for safer havens
Reuters, Tuesday, August 18, 1998 at 15:41
By Gilles Castonguay
NEW YORK, Aug 18 (Reuters) - Unnerved by the latest bout of
volatility in emerging markets, more investors are pulling
their money out of developing nations to put it in more
soothing markets in the developed world, according to
strategists and fund managers.
A number of other investors, however, have begun searching
for opportunities in emerging economies where the underlying
fundamentals remain strong, they said.
Geoffrey Dennis, an emerging markets strategist for
Deutsche Morgan Grenfell in London, said investors were tired
of losing money in emerging markets.
"Investors have given up," he said. "They say, 'What's the
point of running the risk of opening myself to losses again?'"
The latest figures from AMG Data Services show outflows
have accelerated from the 413 U.S.-based emerging market funds
that it monitors.
The four-week moving average of the most recent four-week
period ended August 12 shows a rate of outflow of $125 million
a week, compared with $118 million for the period ended August
5, and $38 million for the period ended July 29.
"Negative sentiment has re-emerged," said AMG President Bob
Adler.
Fund managers have told Reuters that they were putting
money in safer investments such as the U.S. dollar and the
Swiss franc, as well as U.S. and German government bonds.
Dennis said investors had become less tolerant of the
unpredictability of emerging markets, selling positions at the
slightest sign of trouble.
The latest sign came on Monday from Russia, which
effectively devalued its currency by as much as 30 percent and
declared a 90-day moratorium on some foreign debt repayments.
The country's financial problems heightened the anxiety
among investors who were already nervous about the possibility
of another round of currency devaluations in Asia, which has
also been struggling with its own financial crisis.
Latin America has not escaped the flames, either.
The ING Barings index of the region's leading stocks <.LAT>
has dropped nearly 30 percent since the start of the year.
Dennis said investors were staying as liquid as possible
amid the latest turmoil.
"They are very cautious, very cash rich," he said.
Donald Elefson, an emerging markets portfolio manager at
Salomon Smith Barney, said he estimated funds had bolstered
their cash positions to as much as 30 percent of assets.
"Most emerging market funds are running substantial cash
positions," he said.
Dennis said he was recommending clients put their money in
relatively safer markets in Eastern Europe and the
Mediterranean, such as Israel and Turkey.
He said he was also suggesting going long on Latin America.
"The (region's) valuations are very compelling," he said.
Investors were well advised to stay "absolutely" clear of
Asia, however. "The fundamentals are so bad," he said.
Elefson said he saw good values in telecommunications,
including Poland's Elektrim SA (WARSAW:ELEW.S), which has a stake in
a local cellular firm, and Telesp (SAO:TLSP4), a fixed-line
phone company created after the privatization of the Brazilian
telecommunications giant, Telebras S.A. (SAO:TELEB4) (NYSE:TBR).
"The fundamental valuations are not being looked at," he
said. "Investors have lost all signs of reason."
James Holmes, a portfolio manager at Heartland Advisors,
which manages $4 billion in assets, said he also saw bargains
in Latin America.
"I think South America or some key countries like Argentina
or Brazil are a much, much lower in risk," he said.
Holmes said he liked Telebras and Argentinian oil company
YPF SA (BUE:YPF.D) (NYSE:YPF).
"You got to be patient," he said. "If you have an 18-month
horizon, its a great time to be buying."
By Gilles Castonguay
NEW YORK, Aug 18 (Reuters) - Unnerved by the latest bout of
volatility in emerging markets, more investors are pulling
their money out of them and putting it in safer markets in the
developed world, according to strategists and fund managers.
A number of other investors, however, have begun searching
for opportunities in emerging economies where the underlying
fundamentals remain strong, they said.
Geoffrey Dennis, an emerging markets strategist for
Deutsche Morgan Grenfell in London, said investors were tired
of losing money in emerging markets.
"Investors have given up," he said. "They say, 'What's the
point of running the risk of opening myself to losses again?'"
The latest figures from AMG Data Services show outflows
have accelerated from the 413 U.S.-based emerging market funds
that it monitors.
The four-week moving average of the most recent four-week
period ended August 12 shows a rate of outflow of $125 million
a week, compared with $118 million for the period ended August
5, and $38 million for the period ended July 29.
"Negative sentiment has re-emerged," said AMG President Bob
Adler.
Fund managers have told Reuters that they were putting
money in safer investments such as the U.S. dollar and the
Swiss franc, as well as U.S. and German government bonds.
Dennis said investors had become less tolerant of the
unpredictability of emerging markets, selling positions at the
slightest sign of trouble.
The latest sign came on Monday from Russia, which
effectively devalued its currency by as much as 30 percent and
declared a 90-day moratorium on some foreign debt repayments.
The country's financial problems heightened the anxiety
among investors who were already nervous about the possibility
of another round of currency devaluations in Asia, which has
also been struggling with its own financial crisis.
Latin America has not escaped the flames, either.
The ING Barings index of the region's leading stocks <.LAT>
has dropped nearly 30 percent since the start of the year.
Dennis said investors were staying as liquid as possible
amid the latest turmoil.
"They are very cautious, very cash rich," he said.
Donald Elefson, an emerging markets portfolio manager at
Salomon Smith Barney, said he estimated funds had bolstered
their cash positions to as much as 30 percent of assets.
"Most emerging market funds are running substantial cash
positions," he said.
Dennis said he was recommending clients put their money in
relatively safer markets in Eastern Europe and the
Mediterranean, such as Israel and Turkey.
He said he was also suggesting going long on Latin America.
"The (region's) valuations are very compelling," he said.
Investors were well advised to stay "absolutely" clear of
Asia, however. "The fundamentals are so bad," he said.
Elefson said he saw good values in telecommunications,
including Poland's Elektrim SA (WARSAW:ELEW.S), which has a stake in
a local cellular firm, and Telesp (SAO:TLSP4), a fixed-line
phone company created after the privatization of the Brazilian
telecommunications giant, Telebras S.A. (SAO:TELEB4) (NYSE:TBR).
"The fundamental valuations are not being looked at," he
said. "Investors have lost all signs of reason."
James Holmes, a portfolio manager at Heartland Advisors,
which manages $4 billion in assets, said he also saw bargains
in Latin America.
"I think South America or some key countries like Argentina
or Brazil are a much, much lower in risk," he said.
Holmes said he liked Telebras and Argentinian oil company
YPF SA (BUE:YPF.D) (NYSE:YPF).
"You got to be patient," he said. "If you have an 18-month
horizon, its a great time to be buying."
Copyright 1998, Reuters News Service |
