Emerging markets have suffered since early May, with emerging market bonds having lost $1.1 billion since the beginning of that month, according to Emerging Portfolio Fund Research. This has triggered many column inches in the press pointing to the bursting of the latest emerging markets bubble and the start of a major markets correction. Some hedge funds are said to have lost as much as 20% in May alone.
The outflows, though, look less spectacular when compared with inflows into emerging market debt of $4.7 billion between January and April.
The CIS has so far proven impervious to the sell-off – Kazakhstan has bucked the trend and actually witnessed an increase of fund inflows of almost $400 million in the past couple of months, around four times the volume it received in the first part of the year.
According to research from Dresdner Kleinwort Wasserstein, the positive view taken by investors has been shared by the rating agencies. By the middle of June, six Russian banks, 10 corporates and three municipal entities had received either upgrades or positive outlooks since May 10, and eight Kazakh banks and corporates were also upgraded. Ukraine had less luck, as it waited for an outcome to its interminable political stalemate.