Friday, September 20, 2013

Did the Fed bailout Emerging Markets?

Has Turkey been bailed out by the Fed, the Zero Hedge inquires? (bold original)
Following the Fed's decision to not Taper, Turkish stocks were the world's best performing asset overnight. Jumping almost 8% today, the main Turkish stock index is now up over 26% in the last 3 weeks, back above its 200DMA and in bull-market territory as BAML notes "the Fed decision amounts to a bailout for Turkey." While the fundamental adjustment in current account imbalances remains unfinished, in the near term gross bearish positioning and the dovish FOMC decision are likely to support Turkey bonds... once again removing any pressure for a politician to make any hard decision anywhere in the world. How do you say "thank-you, Ben" in Turkish? (or Indonesian, Indian, Malaysian, or Thai?)
image

In addition to Turkey, other EM bourses has been buoyed by the FED (including those of EM Asia as mentioned).

image
Brazil’s Bovespa
image
Russia’s MICEX
image
Indonesia’s JCI
image
Malaysia’s KLCI
image
Thailand’s SETI
image
The Philippine Phisix
image

And another biggest beneficiary from the Fed's actions seems to be India, whose BSE-SENSEX has reached a 2011 high! See no risks of a crisis. The Fed’s magic wand shooed them away.

image

The near sweeping bailout of emerging markets can be seen via the iShares Emerging Markets (EEM)

The bailout has not just been an EM affair, it has extended to developed Asia Pacific…

image

Such as Singapore’s STI

image

and Australia ASX 200 (at record highs)

The above equity markets began to rally in anticipation of a modest tapering by the FED. Besides with other assets down, equity markets became the only alternative or magnet for yield chasers. And the Fed's "UNtaper" served as the icing on the cake.

The only “fundamental” thing relevant to the current financial markets has been central banking bailouts.

Yet for every artificially generated boom there is eventually a corresponding...

1 comment:

theyenguy said...

On Wednesday September 18, 2013, a QEternity rally drove the Emerging Market Stocks which had sold off, strongly higher, as is seen in the combined ongoing Yahoo Finance Chart of New Zealand, ENZL, Chile, ECH, Malaysia, EWM, India, INP, and especially thailand, THD, Philippines, EPHE, Turkey, TUR, and Indonesia, IDX, with the latter recovering 20% from their sell off lows ... http://tinyurl.com/ksx63vw

Mike Mish Shedlock writes One sided risk assessment. The Fed sees risks all the time. But it's all one-sided. The Fed never sees risk in tightening too little. The Fed always sees risks in tightening too much. The result is a series of bubbles of ever-increasing amplitude.

And Mike Mish Shedlock writes Let's see how long this rally in emerging market currencies lasts. I suspect not long. Brazilian state development bank president Luciano Coutinho who expects currency volatility to increase because the Fed didn’t start tapering. “For us, the sooner it starts and ends, the better. I would rather see it start today and have some date to finish because then we will feel the whole impact. The worst thing is the uncertainty.” And Bloomberg reports One-hundred-year bond wipeout in Mexico triggered by Fed.

Back in July Wall Street Fool wrote Home builders about to feel the wrath of The Titans. The FED tapering its QEternity Program, is probably the single worst news for Home Builders Stocks.

QEternity rallied Home Builders, ITB, more than any other sector.

Jim Sinclair writes of the Wednesday September 17, 2013, money printing operation by the US Federal Reserve in article QE to infinity. QE is in fact debt monetization but central banks do not want to call it that because the historical and traditional understanding of debt monetization is and will in time follows.


I comment that a re-monetization of the world's only debt-free money, that being gold, is underway. And that the chart of the Gold ETF, GLD, shows that today it entered an Elliott Wave 3 up with a 4.4% rise on Wednesday, September 17, 2013; these are the most powerful of all economic waves, generating the bulk of wealth gains.