Strengthening of US dollar fails to impact investment in emerging markets
Andrew Dalrymple a veteran specialist in emerging markets refutes the misconception that the strengthening of the US dollar has an adverse impact on investment in emerging markets.
1 In November 2016 many investors turned away from funds that focus on debt, and with that a ground-breaking value of 6.6m USD was stripped away from emerging market funds.
Despite the above, Andrew takes a view that few emerging market companies rely on the US dollar debt and therefore few have been affected.
Andrew Dalrymple said “Dollar strength is usually regarded as the death knell for Emerging Markets, a view that we would contest strongly. It is widely believed that Emerging Market corporates rely on US Dollar debt on a widespread basis. The reality is that very few Asian and EM companies actually finance to any material extent in foreign currencies. For example, only 6% of Chinese corporate debt is denominated in US Dollars. The fears of a wholesale currency mismatch are a hangover from the late 1990s “Asian Crisis,” and are simply incorrect.”
1 Bloomberg: The Emerging Markets' Dollar Problem https://www.bloomberg.com/gadfly/articles/2016-11-18/emerging-market-borrowers-have-a-big-dollar-problem
Notes to Editors
Aubrey Global Emerging Markers strategy - Overview
Growth in consumption in Emerging Markets is, in Aubrey’s view, the best long term, structural opportunity in what is an otherwise low growth world. The aspirations of the 5 billion or so potential customers in the emerging world are much the same as those in the developing world: better food, housing, transport, healthcare, education, entertainment. Aubrey’s wealth cycle attempts to identify those sectors of an economy which are at the sweet spot of growth.
The Aubrey Global Emerging Markets Opportunities Fund focuses on these rapidly growing sectors in countries with political and economic backdrops conducive to income growth. We search for companies with market dominance, preferring local leaders, with cashflow returns adequate to support growth, and with reasonable valuations.
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