Emerging Markets in 2009 - What to expect ??

The Year 2008 will go down in history as one of the most difficult years in the history of Financial Markets. It started with the Sub prime bubble that swallowed huge amount of money from the Banks treasury , in turn causing a wide spread credit crunch that triggered the Demise of Lehman bros , Bear sterns & AIG. The Problem that started from the Developed world has been contagious and caused huge problems to the emerging markets as well. The theory of decoupling proved to be wrong. Emerging markets have taken a bigger hit than the developed ones.

Russia and India -- two of the four once-mighty BRIC countries -- are among the five worst-performing major global emerging markets this year. Brazil and China are also deeply in the red, down 56% and 52% respectively.The MSCI Emerging Markets index shed 56%, as investors pulled billions of dollars out of developing economies.


Worst hit by the turmoil was Eastern Europe, where equities have tumbled 68% this year. Several countries, including Hungary and Ukraine, have sought financial aid from the International Monetary Fund.

Some of the worst-performing emerging markets

Russia: Equities in resource-dependent Russia have plummeted as much as 72% this year, as the country was battered by the worst financial crisis since 1998. Falling oil prices and Geo political tensions with Georgia added more concerns on russian markets.

India: Indian equities have fallen 65% this year as last year's rally has unraveled. In 2007, India was one of three best-performing emerging markets, but asset prices had surged to unsustainable levels. GDP is expected to slow down significantly , the recent IIP numbers confirm that possibility.

Outlook for 2009 :

* The scorching pace at which economies like china and India were growing will definitely not be seen in 2009. The ripple effect of the crisis begins to show up on these economies. China would slip to Single digit growth.

* China's export and import have slowed down significantly. China is highly dependent on export oriented growth. In India which in driven by domestic consumption also feels the slow down in demand. Companies are beginning to cut down on production and announce lay off's.

* Brazil and Russia are commodity driven markets, with commodity prices tumbling these markets are at a higher risk.

* The concerns on deflation is begging to show up, US and UK central banks have sounded their concerns over deflationary scenarios. Deflation will lead to a depression, as it happened in the 1930's.

* Oil prices have fallen to a 5 year low of $33 inspite of record production cuts by OPEC. This provides a breather for India where subsidy burden for Oil products is very high.

* Not much of recovery in expected in 2009 in terms of economic growth. As US is expected to fall into a severe recession. Job losses could peak at 9-10% and US GDP could Slip significantly.


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