Fears that the financial malaise engulfing Europe right now will spread beyond the region appear to be well-founded. In fact, Citigroup Latin America strategist Jason Press says it’s no longer a question whether it’ll happen because the EU crisis is already taking a toll on emerging markets.
“All markets are watching Europe,” Press tells me in the attached video, adding that so-called “Euro contagion” has infected Latin American stock markets faster than it pollutes their economies. However, the flipside of that (e.g. the risk-on trade) is also true, which was clearly evident in October when the region posted some of its largest gains in over 15 years.
“You get this perception that Brazil and other markets within Latin America will suffer as high risk assets,” Press says. “We are actually a bit cautious on emerging markets for the very short-term, but we do expect that fundamentals should once again trump the sentiment argument, so we are buyers of emerging markets globally.”
See the full “Breakout” video below:
Related ETFs: iShares MSCI Emerging Index Fund (NYSEArca: EEM), iShares Latin America 40 Index (NYSEArca: ILF), iShares MSCI Brazil Index Fund (NYSEArca: EWZ), iShares MSCI Chile Index Fund (NYSEArca: ECH), iShares FTSE China 25 Index Fund (NYSEArca: FXI)