A stronger dollar and surging US yields, combined with China’s economic woes, brought it all to a head.
The third quarter was a story of dashed hopes in emerging markets, with the unraveling of some of the most profitable trades in the asset class.
Recent losses have come alongside a surge in global volatility, fueled by renewed concern over China’s property crisis and a rise in US Treasury yields. An emerging-market implied volatility index rose as much as 3.33 percentage points over the past week, the most in a year, the data show. The recent declines are all the tougher to take in light of the bullish calls made earlier in the year by Wall Street money managers.
Looking ahead About $688 billion in shareholder wealth in emerging-market stocks has been erased in September, bringing the total wiped out since July 31 to $1.54 trillion, according to an analysis of data compiled by Bloomberg. Some are eyeing currency relative value trades as pockets of opportunity. These kinds of trades take the US dollar out of the equation, and focus more on crosses where one currency is expected to outperform relative to another regional counterpart.
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