EMERGING MARKETS … AND TRENDS

emerging markets are drawing the attention of investors again, albeit in a muted sense. The result of the US presidential election, together with low- or negative-yielding interest rates in predominantly developed markets, may just be the boon that emerging-market assets need.

In late September, the World Economic Forum reckoned that there was $13.7tr parked in assets yielding negative returns. That is roughly the size of China’s GDP. But we will be comparing income statement with balance sheet items. For investors, and the growing ranks of pensioners in developed markets, this doesn’t bode well for the near future. As returns diminished in markets, such as the EU, Britain, Japan and the US, money managers have reached to riskier markets in a bid to gain some positive returns. These money flows to emerging markets, however, have been historically volatile. Nevertheless, $13.7tr in negative-yielding assets is an immense amount. The world is awash with cheap cash, and emerging markets – with or without each nation’s idiosyncrasies – could benefit from this vast mountain of capital.

First, though, we need to contextualise the conundrum that developed markets, and some emerging markets, find themselves in. Global government debt has ballooned over the past two decades, with a rapid increase since the failure of Lehman Brothers in 2008 and the subsequent global financial crisis. In the EU, austerity – driven by fiscally prudent nations, such as Germany, the Netherlands and Denmark, among others – took states, such as Portugal, Ireland, Italy, Greece and Spain to the fiscal brink. There was even