Global banks first expanded into emerging markets to bring greater efficiency and foster competition but, with the effects of the financial crisis, they are now pulling back.
Global markets were fairly quiet this week, with emerging-market asset prices remaining basically unchanged despite the high volatility observed in oil prices, according to a recent research by Barclays Capital.
China makes up 10% of the world economy, its GDP is growing at 8.9%. As of January 2012 its inflation rate is down to 4.5% and its economy is on course for a soft landing. And yet its share of global investment remains woefully below its true potential.
Perhaps driven by the turbulence in global markets, gold prices continue to edge higher. The price of gold saw an uptick this morning as the U.S. dollar was paring its recent gains versus a basket of currencies ahead of the inflation data from the U.S.
After taking a 21% tumble last year, emerging markets have rebounded so far in 2012 on the back of a resurgent investor appetite and a risk-on mood for emerging markets.
Emerging markets equity investors took a beating in 2011, as rising inflation in these economies and a quest for liquidity in the developed world conspired against them.
Using the domestic resource sector as a proxy for emerging markets gives the investor exposure to only one side of the growth story.
Risk appears to be back in vogue. While most investors are wary of the European and U.S. stock markets, money has already been pouring into emerging markets so far this year, with funds dedicated to the asset class enjoying their best start to a year since 2006.
RBC Global Asset Management Inc. announced today the launch of BlueBay Emerging Markets Corporate Bond Fund, RBC U.S. Mid-Cap Value Equity Fund and RBC U.S. Small-Cap Core Equity Fund for individual and institutional investors in Canada.
While the rest of the world’s central banks have been fighting deflation, those in Asia have been fighting inflation. Now, it appears the battle has been won.