Take on emerging markets – deciders perspective

As there have been some strong movements in global markets in the last few days, here are my thoughts

For emerging markets: The strengthening of USD and increasing interest rates mean:

• -> weakening of emerging markets currencies
• -> so commodity prices in the emerging world shoot up
• -> so cost to companies increases (for example, the price of oil)
• -> so lower profits are anticipated
• -> so Sensex drops.

Some additional observations:

• Defensive sectors are picking up – healthcare, energy, industrials, utilities: people are moving to safe assets.
• The American dollar is going up!
• The gold price has done well in emerging markets.

Mainly notes for myself on investing in emerging markets (these are just thoughts, not advice; take this rants at your own risk):

• Safe investors: This is the time to be in cash or money markets (it was not sexy, now it is – 2%)
• Risky investors: If you have the ability to short without a lot of leverage, it might be worth trying small caps that ran too far.
• Market neutral long large cap, short small caps.
• Gold is only advisable in emerging markets with conviction.
• If you want to stay in stocks, rotate to safer sectors like healthcare, utilities.

Preserving your capital is more important than anything else in such times.