Aberdeen Asset Management boss Martin Gilbert was in a bullish mood yesterday, insisting that his firm posted "a great set of numbers considering emerging markets are so out of fashion”.
Emerging markets did, indeed, fall out of fashion earlier in the year – largely accounting for the £12.7bn worth of outflows that Aberdeen racked up in the three months to September. That drop was reflected more broadly in the industry, with data from Markit in August revealing $9bn worth of outflows from exchange traded funds (ETFs) that track emerging markets.
On top of this, capital outflows from emerging markets are on course to exceed inflows this year for the first time since 1988, according to numbers released by the Institute of International Finance in October.
Meanwhile, the significance of the situation was exposed last month by figures compiled by City A.M. – our front page on 4 November revealed that eight emerging market exposed blue-chip companies in the UK had seen their combined market cap tumble by an eye-watering £78.7bn since Chinese markets peaked in mid-June.
The FTSE’s exposure to global market movements is a major reason why its performance has been so disappointing during 2015. However, new data from Markit, seen by City A.M. yesterday, shows that emerging market-tracking ETFs generated $4bn of inflows during October and November, possibly indicating that the sell has run its course.
So have EMs turned the corner?
Not necessarily. This apparent bounce-back shouldn’t be thought of as too indicative of things to come – a similar rise was recorded over a period during the spring/summer, which was followed by record outflows in the following months.
As Gilbert also noted yesterday, much depends on the Federal Reserve’s normalisation of its monetary stance; and with many people betting that the meeting on 16 December will result in a hike, we’ll soon have some indication on how this might play out. The move, if it comes at all, will be slight – but it will signal crunch time for many other parts of the world.