The European Central Bank’s monthly rate decision is due on Thursday with ECB President Mario Draghi widely expected to announce an easing of monetary policy to stave off stubbornly low inflation and European government bond yields have rallied to record lows in anticipation. The question for investors is whether the easing in Europe will have the same effect as QE in the US and send billions of Euros back into global emerging markets.
The Financial Times recently talked to various experts with John Vail, the chief investment officer at Nikko Asset Management, saying that the ECB’s move is “pretty well priced in,” but expectations of easing have already had “ramifications all over the world” by pushing down yields on European debt. He also commented that “it’s really created this gigantic new wave of the search for yield” and much of that move has played out within Europe, helping to push yields down on government bonds in countries such as Hungary and Poland.
Meanwhile, Adrian Mowatt, the head of emerging market equity strategy at JPMorgan, says the impact of action from the ECB would probably be limited to nearby Greece and Turkey because investors in Asia remain far more focused on policy in the US and on the economy in China.
To read the whole article, How ECB QE could affect emerging economies, go to the website of the Financial Times.
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