BCA: Emerging Market Decoupling To Persist Into 2008
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January 3rd, 2008 by AdvisorAnalyst
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BCA Research confirms its outlook on decoupling of emerging markets and the U.S. in its January 3, 2008 Bulletin:
January 3, 2008
Emerging markets have weathered the U.S. credit market calamity very well and the bull run will continue in 2008.
The economic decoupling between emerging economies and the U.S. is attributable to underlying fundamentals and is therefore sustainable. Unlike in the 1990s when emerging economies relied on foreign capital to finance their expansion, many of these countries are now net creditors in global financial markets and are not vulnerable to a withdrawal of financing by G7 banks.
Domestic interest rates are still very stimulative thanks to their strong currencies and vast savings, which will continue to underpin domestic demand growth. While exports to the U.S. have been slowing, trade among developing economies is booming.
As a result, overall emerging market growth will not slow considerably, even if the U.S. economic slump continues. Bottom line: Our Emerging Markets Strategy service recommends that investors continue to overweight emerging equity markets within a global portfolio.
Read more from the author/contributor here.
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