Wednesday, December 1, 2010

Bonds, commodities & equities: they can't all go up

JOHANNESBURG -

Emerging market government bonds have been in a bull market for nearly two years, but then, so have emerging market equities, and dollar commodity prices. This trifecta has a number of parallels, not least rallies in many other indices, particularly on the equities front.

Overlooking a few exceptions in exotic places like Greece and Ireland, most equity markets have been on the rise since early 2009, after investors conceded that the world did not end during the 2008 "global financial crisis".

Emerging market equities have outperformed those in the developed world. Portfolio flows have been attracted by higher growth prospects in emerging markets, along with relatively well-managed macroeconomies, benign inflation, balanced government finances, and generally prevalent trade surpluses. The general trends have encouraged strong flows into emerging market bonds, and dollar commodity prices have been firmly supported by heavy raw materials growth in developing nations. (more)

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