<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Oct 14, 2008
OUTLOOK FOR EMERGING MARKETS
</TR><!-- headline one : start --><TR>Further losses ahead: Bankers
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->EMERGING markets will face more gloom after suffering their worst quarterly loss in history as the global financial crisis starts to bite into their high growth economies, private bankers in Asia warned yesterday.
They said emerging markets, which suffered a full-blown crisis just a decade ago, are most vulnerable to prolonged pessimism because investors have likely already cut exposure to more liquid markets.
'The one thing that makes these markets a lot more volatile than, for example, the United States or the European markets, is they're thinly capitalised,' Mr Marcel Kreis, head of Asia-Pacific private banking for Credit Suisse, told the Reuters Wealth Management Summit in Singapore.
'Everyone is going to be reminded again that it is easy to buy. It's a hell of a lot more difficult to sell. And it's one of the reasons why we say: Be a little bit more cautious on direct investments in emerging markets.'
Emerging market equity funds saw more than US$30 billion (S$44 billion) in outflows in the first nine months of the year, after seeing inflows in each of the last five calendar years, according to estimates from Morgan Stanley. The outflows have wiped out over a fifth of the total inflows from 2003 to last year.
After rising more than 36 per cent last year, MSCI's main emerging market equity index hit a new three-year low last Friday. The index has fallen more than 50 per cent this year, much of that in the third quarter. The index gained more than 4 per cent yesterday after policymakers worldwide took bold steps to rescue the financial system, including guaranteeing bank deposits and taking stakes in banks.
But private bankers, who cater to the very rich, said the financial crisis' impact on emerging economies is still unfolding and many countries have heavy exposure to beaten-down commodity prices.
Corporate failures are likely to rise across Asia as the global financial crisis and its impact on access to credit, drive weaker firms to insolvency, said Ms Jennifer Tay, Asia-Pacific head of portfolio counselling for Citi Private Bank.
The unit of Citigroup Inc has warned its wealthy Asian clients that emerging markets are likely to suffer further losses in coming months, particularly in countries where political uncertainty is high.
'For the next few months, anything that is emerging markets oriented, they would have a further beating, that is what we anticipate,' she said. 'It doesn't help that the geo-political situation in this area is also not great, Thailand and the situation there, and Russia, for example.'
Thailand's worst street violence in 16 years has already started to hurt its tourist industry. Russia, Romania, Ukraine and Indonesia are among countries that recently suspended their markets to halt selling by panicked investors.
While private bankers said the strong, long-term economic outlook remains intact for many emerging markets, particularly in Asia, the risks of jumping into the asset class now are likely too high.
'Even if they are starting to become cheap...we don't see the impetus happening now. Not yet,' said Mr Pierre Baer, SG Private Bank's chief executive officer for Singapore and South Asia.
Citi's Ms Tay said clients, many of them self-made Asian entrepreneurs, have not been immune to the fear and panic that have gutted financial markets as investors react to the greatest financial crisis since the Great Depression.
She said the portfolios of clients who took a diversified approach were probably down about 10 to 15 per cent this year.
Clients who invested more aggressively in asset classes like currencies or in commodities only have fared worse. In many cases, they are fleeing equities, commodities and currency bets, intent on preserving capital at the risk of forfeiting yield. She said much of that capital has gone into safe-haven US Treasuries.
Some clients have also put money into debt and preferred share issues by DBS Group Holdings, United Overseas Bank and OCBC Bank. 'They are still quite keen on the Singapore banks. They still view them as too big to fail or backed by the Singapore Government,' she said.
For Ms Tay and other advisers at the private bank, much of the focus is now on ensuring clients do not 'throw the baby out with the bathwater' and maintain some exposure to equities to capture any potential rebound. REUTERS
OUTLOOK FOR EMERGING MARKETS
</TR><!-- headline one : start --><TR>Further losses ahead: Bankers
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->EMERGING markets will face more gloom after suffering their worst quarterly loss in history as the global financial crisis starts to bite into their high growth economies, private bankers in Asia warned yesterday.
They said emerging markets, which suffered a full-blown crisis just a decade ago, are most vulnerable to prolonged pessimism because investors have likely already cut exposure to more liquid markets.
'The one thing that makes these markets a lot more volatile than, for example, the United States or the European markets, is they're thinly capitalised,' Mr Marcel Kreis, head of Asia-Pacific private banking for Credit Suisse, told the Reuters Wealth Management Summit in Singapore.
'Everyone is going to be reminded again that it is easy to buy. It's a hell of a lot more difficult to sell. And it's one of the reasons why we say: Be a little bit more cautious on direct investments in emerging markets.'
Emerging market equity funds saw more than US$30 billion (S$44 billion) in outflows in the first nine months of the year, after seeing inflows in each of the last five calendar years, according to estimates from Morgan Stanley. The outflows have wiped out over a fifth of the total inflows from 2003 to last year.
After rising more than 36 per cent last year, MSCI's main emerging market equity index hit a new three-year low last Friday. The index has fallen more than 50 per cent this year, much of that in the third quarter. The index gained more than 4 per cent yesterday after policymakers worldwide took bold steps to rescue the financial system, including guaranteeing bank deposits and taking stakes in banks.
But private bankers, who cater to the very rich, said the financial crisis' impact on emerging economies is still unfolding and many countries have heavy exposure to beaten-down commodity prices.
Corporate failures are likely to rise across Asia as the global financial crisis and its impact on access to credit, drive weaker firms to insolvency, said Ms Jennifer Tay, Asia-Pacific head of portfolio counselling for Citi Private Bank.
The unit of Citigroup Inc has warned its wealthy Asian clients that emerging markets are likely to suffer further losses in coming months, particularly in countries where political uncertainty is high.
'For the next few months, anything that is emerging markets oriented, they would have a further beating, that is what we anticipate,' she said. 'It doesn't help that the geo-political situation in this area is also not great, Thailand and the situation there, and Russia, for example.'
Thailand's worst street violence in 16 years has already started to hurt its tourist industry. Russia, Romania, Ukraine and Indonesia are among countries that recently suspended their markets to halt selling by panicked investors.
While private bankers said the strong, long-term economic outlook remains intact for many emerging markets, particularly in Asia, the risks of jumping into the asset class now are likely too high.
'Even if they are starting to become cheap...we don't see the impetus happening now. Not yet,' said Mr Pierre Baer, SG Private Bank's chief executive officer for Singapore and South Asia.
Citi's Ms Tay said clients, many of them self-made Asian entrepreneurs, have not been immune to the fear and panic that have gutted financial markets as investors react to the greatest financial crisis since the Great Depression.
She said the portfolios of clients who took a diversified approach were probably down about 10 to 15 per cent this year.
Clients who invested more aggressively in asset classes like currencies or in commodities only have fared worse. In many cases, they are fleeing equities, commodities and currency bets, intent on preserving capital at the risk of forfeiting yield. She said much of that capital has gone into safe-haven US Treasuries.
Some clients have also put money into debt and preferred share issues by DBS Group Holdings, United Overseas Bank and OCBC Bank. 'They are still quite keen on the Singapore banks. They still view them as too big to fail or backed by the Singapore Government,' she said.
For Ms Tay and other advisers at the private bank, much of the focus is now on ensuring clients do not 'throw the baby out with the bathwater' and maintain some exposure to equities to capture any potential rebound. REUTERS
