EMERGING MARKETSBE CAREFUL IN CATCHING THE EMERGING MARKETS FALLING KNIFEor at least be selective in your picksIt is barely a few months since we got worried about a new wall of money heading to emerging markets on the back of quantitative easing by the Bank of Japan and lingering doubts about the strength of US recovery. Emerging-market value funds have been in disrepute on Wall Street in recent years, falling by 38% between 2011 and 2015, according to t he Wall Street Journal.
Using the classic value approach, t hese funds firm bought stocks of companies that have been shunned by other investors in markets such as Brazil, Russia and South Africa. The world has become a smaller place than ever before. With advancements in science and technology, economies from all corners of the globe have become interdependent and firms that do business in emerging and frontier trading forex emerging market valuations are accessible to both consumers and investors from developed nations.
With the ever-increasing growth of emerging economies, such as the BRIC nations, investors are looking for more and more ways to diversify their portfolios to include securities from these markets. A major issue that many fund managers and individual investors face, however, is how to properly value companies that do the majority of their business in emerging market economies.