Tags: BofA | Woo | Emerging | Market

BofA's Woo: Emerging-Market Contagion Worries Are Overblown

Monday, 03 Feb 2014 08:08 PM

Concern that the emerging-market sell-off will persist is overblown and the crisis will spread less than expected, Bank of America Corp.’s David Woo said Monday.

The “little bit” of contagion seen over the past two weeks as emerging-market currencies have slid has been more limited than a similar selloff in mid-2013, Woo said. This is a result of investors holding fewer short positions on such higher-yielding assets, or bets that they will fall, he said.

Last summer was “very much an Asia-based crisis,” Woo, head of global rates and currencies at BofA Merrill Lynch in New York, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee. “This time around, Asia has been doing very well. If investors were very long emerging- market FX a year ago, now positioning has been lightened up.” Long positions are bets an asset will rise.

A custom Bloomberg index of the 20 most-traded emerging- market currencies has fallen 1.5 percent to a record low since Jan. 23. Thailand’s baht, the Hong Kong dollar, China’s yuan and the Taiwanese dollar have been four of the top performers versus the U.S. dollar out of 24 emerging-market currencies over the same period. Argentina’s peso and the Russian ruble were the biggest losers.

The gauge dropped 3.7 percent from June through August.

Central bank rate increases in Turkey, India and South Africa last week failed to contain January’s 3 percent selloff in emerging-market currencies. Competition for capital is intensifying with the Federal Reserve paring monetary stimulus while the International Monetary Fund is calling for “urgent policy action.”

Global funds pulled $6.3 billion from emerging-market stocks in the week through Jan. 29, the biggest outflow since August 2011, according to Barclays Plc, citing data from EPFR Global. More than $12 billion has left the funds this year, approaching the full-year outflow of $15 billion in 2013.

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Concern that the emerging-market sell-off will persist is overblown and the crisis will spread less than expected, Bank of America Corp.'s David Woo said Monday.
BofA,Woo,Emerging,Market
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2014-08-03
Monday, 03 Feb 2014 08:08 PM
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