During the past month or so, while rising interest rates anxieties increased the risk aversion profiles of investors thereby affecting emerging assets values, flagging US corporate debt status as that of General Motors and Ford exacerbated these conditions. However, with the recent downgrade of the debt ratings of GM by S & P 500 the sentiment appears to have shown that investors have learned to distinguish between the fundamental profiles of US corporate debt from emerging market assets as demonstrated by emerging markets holding ground in spite of the downgrades.
Quoting a Reuters report…
"Today encapsulated the scene of the last few months, which is a tug of war," said Mohamed El-Erian, who manages $23 billion in emerging market debt as chief emerging markets portfolio manager at PIMCO, the world's largest bond fund.
"On the one hand you have pressure on the market coming from external factors ... the other side of the tug of war is improving fundamentals and the general maturation of the asset class, which is bringing in more investors."
"The selloff, which was the typical kneejerk to bad credit news, immediately produced buyers," he said. "We snapped right back and we're ending the day stronger."
"The more internal resilience the asset class shows, the less willing hedge funds are to short the asset class," he said. "The roller coaster (rides) are becoming much shorter."
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