UBS Wealth Management ReseachEmergency Market GuideMay 27, 2008At a glance
Of the twenty-six emerging market countries we follow, only one – Brazil – currently has an inflation rate still within its target band. Everywhere else, the inflation rate is higher, in some cases substantially higher, than the monetary authorities would like.Emerging Market Equities Despite global financial market uncertainties, emerging market fundamentals remain strong and economic indicators show only a slight moderation in economic activity. However, valuation levels already reflect a large part of these positive fundamentals. With weaker global growth ahead, we think earnings downgrades will be difficult to avoid but are confident that emerging markets will continue to deliver higher growth than the global average in 2008. Emerging Market Debt Higher long-term inflation expectations have driven local bond yields upward. One possible consequence of rising local bond yields could be that governments once again issue more foreign- currency debt. Currencies Till now, this year has been more difficult for emerging market currencies than the previous several years. But even amidst risk reduction, fundamentally sound emerging market currencies continue to do well.
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