According to a lengthy AP article, Brazil, South Africa, India, Indonesia and Turkey, five emerging markets dubbed the “Fragile Five” by analysts at Morgan Stanley, are no longer so fragile because some of these countries have taken steps to strengthen their economies while others have had elections that have increased investor confidence. At the same time, growth is slowing in the US – making emerging markets more attractive.
In addition, the “Fragile Five” have raised interest rates to attract foreign investors. For example: India has lifted its rate from 7.25% in September to 8% in March while Brazil hiked rates from 7.5% in May of last year to their current level of 11%.
With that said, the AP quoted Andres Garcia-Amaya, a global market strategist for J.P. Morgan Funds, as saying the comeback in emerging markets is driven by market-specific factors, not improvements in the outlook for economies, and its unlikely to last long. He added that:
“The message for investors is, don’t treat (emerging markets) as one. It is very important to do your homework at the country level.”
Case in point: Brazil – where troubles surrounding the World Cup and the coming Olympics threaten to cast a damaging spotlight on the country.
To read the whole article, Brazil, other markets are no longer ‘Fragile Five,’ on Yahoo! News.
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