If you recall, the emerging markets came into the Japanese earthquake already having underperformed the developed world due to inflation and other issues.
Today, with the Nikkei down 10.6% overnight in its worst extended retreat since the 1987 crash, emerging markets throughout the Pacific Rim are suffering in sympathy.
All of the recent Japan-related fears of global growth slowing or even halting will hurt the emerging markets that export to the developed world.
But it will also take the pressure off those with inflation-related concerns — which have actually been bigger problems for these markets than growth-related concerns in the recent cycle.
The Tokyo market, as reflected by the iShares MSCI Japan Index (NYSE:EWJ) has been at the center of this, while closely linked markets like Taiwan — or iShares MSCI Taiwan Index (NYSE:EWT) — have also sold off significantly.
Naturally, the ETFs have yet to reflect last night’s performance, so watch out below:
On the defensive side, Russia will be relatively resistant to any prospect of contagion. Brazil will be relatively defensive as well. This may spur a bid to funds like the Market Vectors Russia ETF (NYSE:RSX) and the iShares MSCI Brazil Index ETF (NYSE:EWZ) today.
Turkey has rallied 11% in five days and should also continue as a safe haven of sorts if the Middle East remains calm. Take a look at the iShares MSCI Turkey Invest Mkt Index (NYSE:TUR).
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.