Friday, January 19, 2007

A new bout of sell-offs in emerging markets is likely ?at some point?, the Institute for International Finance warned on Thursday, as it unveiled forecasts for a slight easing in private ?capital flows to emerging markets this year.

Charles Dallara, managing director of the IIF, which represents most of the world?s leading banks, was troubled by the market?s apparent disregard for the risks facing emerging ?market assets.

?We think there is a good bit of uncertainty out there and we are not sure the markets have fully priced that in,? he told the Financial Times. Mr Dallara doubted whether investors had learned the right lessons from the sell-off in emerging market equities and debt last spring, which was swiftly followed by a renewed strong bull market.

?I think the markets are somewhat vulnerable to events that cause investors and creditors to revisit the pricing of risk,? he said.

Two of the fundamental drivers of emerging market performance in recent years ? strong global growth and abundant liquidity ? would both moderate a little this year. And Mr Dallara questioned whether much had changed in terms of structural reforms, which he said were ?stalled? in many countries, to justify continued asset price gains.

Mr Dallara was particularly scathing about central and eastern Europe, where he said fiscal conditions were expected to deteriorate in many countries this year.

Continue reading “Emerging markets sell-off bout likely

Source: Financial Times (link opens in a new window)