Emerging Markets in Another Death-Spiral

With the U.S. stock market flat from 2000 to 2007, emerging markets were all the rage for investors, led by the China stock exchange's 330% rise. But when the Great Recession hit, U.S. stocks fell 50% versus the highly speculative emerging-markets crash led by the Chinese market's death-spiral that sent prices down 72% in eighteen months. Motivated by greed and undeterred by pain, Wall Street brokers and money managers have poured $400 billion of their customer's cash into these treacherous markets since the crash. But with little investment return and Fitch Ratings recently warning of rising credit risk, the emerging market may in for another death-spiral. The Economist magazine on November 9th published "Sleepless Nights" regarding the rising concerns by emerging-market central banks that the combination of slowing growth and rising interest rates could set off another market crash that might rival the 2008 to 2009 bloodbath. Once known for averaging double-digit economic...(Read Full Article)

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