Tags: emerging | markets

Get Into Emerging Markets Ahead Of the Rush

Tuesday, 31 Mar 2009 02:46 PM

By Sean Hyman

On Feb. 9, I wrote an article that discussed how money is inching back into the emerging markets. Volatility is beginning to die down, and early signs of global stabilization have attracted some investors to tip toe back into the emerging markets as many of the currencies started to bottom and tick up.

The South African rand was one of the first currencies to start its uptrend. It was followed by the Turkish lira. Norway's kroner has recently done the same, and it looks like Mexico's peso may shortly follow.

Now, a renewed need for hard commodities confirm we're in the beginning stages of global stabilization and this bodes well for currencies.

Copper has recently swung upward. Oil has broken its downtrend and sideways range as it pushed and held above $50 a barrel. Even the CRB index and its basket of goods have started moving upward for the first time in a while.

If volatility is down and there's a renewed demand for goods, then it is a good time to start buying up some foreign currencies and foreign stocks.

Most of the major currencies of the world currently have low interest rates of between 0 percent and 2 percent. With emerging market currencies typically offering yields of between 9 percent to 18 percent, that adds to their appeal.

Big institutions throughout the world are already moving back into these currencies. They know that recessions typically run anywhere from a few months to, in rare cases, 16 to 24 months. We're already at the 16-month mark for the U.S. economy, and that means the recession will likely be over within the next three to eight months.

Much of the investable money is now in the industrialized world. If investors want to invest in emerging markets, then they have to buy the currency of these emerging economies regardless if they want to just invest in that currency or buy up that country's bonds or stocks.

This is what is causing the South African rand, the Turkish lira, the Mexican peso, and the Norwegian kroner to begin their recoveries.

After those currencies, you will see money kick into the Australian and New Zealand dollars and later on, the euro. These currencies have already moved up a bit.

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