LatinFinance - Special Edition - August 2013 - 83

Hari Hariharan

Hans Humes

Mark Mobius

New World Investments

Greylock Capital

Templeton Emerging Markets Group

“I’m bullish on the region,
with this one caveat: we need
orthodoxy. We don’t need a
return to things that were tried
in the past and failed.”
“Commodity prices are going
down, but at some stage economic reality will also have to
set in. Lifting costs are going
up. You have to believe the
rational economic view that
you’re not going to be producing commodities if what you’re
getting for it is a lot lower than
what it costs to produce. If
US demand picks up, Europe
comes out of the mire, and the
Chinese economy stabilizes,
we’re not talking of a dire
scenario or of an apocalypse
scenario.”

“Things have gone a long
way in terms of improving
Latin America in the eyes of
the world—but there is still
a long way to go. A lot of the
money invested has been
somewhat euphoric and has
been allocated because investors wanted to go into emerging markets. There is still a
process where international
portfolios are going to have to
have some higher quality control, stripping through relative
opportunities and assessing
risk.”

“What we find is that in
all markets – emerging,
developed, commodities –
volatility is increasing, not
decreasing. You’d think as
these markets grow, volatility
would go down. A simple programmed trading operation
can move markets: they are
trend followers. Once a trend
begins it keeps going and
going and you end up with
a blowout. That’s generally
what we’re seeing globally.
We have to be aware that if
we react on an hourly, daily,
weekly basis we’re going to
be in trouble.”

meant higher credit ratings, better functioning capital markets and stronger growth.

expectations that the US federal Reserve
would begin winding down its quantitative
easing program sooner than expected –
and that US interest rates would rise soon
thereafter.
Given the extent of the outflows, fears
have resurfaced that fiscal accounts in major economies could start to come under
pressure. meanwhile, a tougher borrowing
environment has already caused problems
for certain corporate credits in Brazil and
mexico.
central bank action to stem crisis in
the developed world by flooding markets
with liquidity led to a surge in capital flows
to latin america and other emerging

regions, in search of better returns. But
martin Schubert, chairman of US-based
investment firm eurinam, says such a
dynamic was always unstable.
“You always knew US rates had to reverse
as the US economy recovered,” he says.
“Yield spreads in em, including frontier
market debt, became too unrealistic, and
the nature of the risk suspect in many
cases.”
“in the near term, the spotlight is off em
debt as an asset class,” Schubert says. “the
party is over for now. How long the emerging market pause will last will depend upon
the speed of US interest rate rises and global
economic growth as well as political prob-

Still vulnerable?
latin america was stress tested during the
global financial crisis and its aftermath.
and the economies of the major countries
– including Brazil, chile, colombia, mexico
and Peru – proved relatively resilient, at
least when compared to previous external
shocks.
However, their financial markets nevertheless still vary according to the whims of
external forces. this fact was brought home
most profoundly in the second quarter of
2013, as capital fled emerging markets on

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