Rout on Asian markets making Europe the new safe haven
Asian stock markets are continuing to get battered. The Jakarta composite index fell as low as 5.8% today and made it a four day slide of 13%. The record highs were only posted in May and now the index is down over 20%. The four day falls in Indonesian stocks are the biggest drop since 2008 and has prompted the Indonesian finance minister to order state owned firms to buy back shares to try to stem the falls.
Currencies are also continuing to be caned with the rupiah falling to the weakest level against the dollar for over 2 years. The moves in EM currencies today forced India to intervene in the rupee via state-run banks.
US treasury futures are said to be taking an influx of EM exiting money as they trade heavy volumes. Last night 347k contracts traded compared to 277k and 177k the prior 2 days.
We’ve been highlighting the floods of foreign investors leaving emerging markets and that’s not going to end anytime soon.
India intervening in the market is a natural move but at best it’s like patching a leak with chewing gum. It’s another reason we will be seeing strength in the euro and pound as they represent good yield opportunities on a backdrop of improving economies. Despite the massive problems still being faced in Europe it is increasingly seen as a safe place to park your money, especially when you can get 3-4.5% on mid to long term European debt. You couldn’t have said that 2 years ago