While China is up a stellar 30% since New Year’s Day 2019 and the post Bolsonaro rally in Brazil has been a license to print money in the Bovespa, the broader emerging markets have been a sucker’s bet in the past decade relative to the S&P 500 and the NASDAQ. Even though all is not exactly hunky dory in the dark alleys of the world with China’s dramatic slowdown, Brexit, protectionism in the West, geopolitical shocks galore and the US Dollar Index at 97, I can finally argue the case to tiptoe back into selected emerging markets beyond last summers recommendation to buy Alibaba at 140, India’s post Chanda Kochar ICICI at 280 rupees and the post Ritz Carlton Saudi stock market in early 2018. All three trade ideas were money makers, as was my call to dump Pakistan’s equities the moment the deep state in the Rawalpindi GHQ dumped thrice elected pro-business, pro-Mayfair real estate Prime Minister Nawaz Sharif.
In my experience, countries run by military intelligence agencies tend not to prioritize shareholder value optimization for US dollar investors as the one third plunge in the Pakistani rupee since Sharif’s judicial coup d’état attests.
Political crises, currency risks, liquidity shocks, dodgy banking Ponzi schemes and periodic brutal sell offs make emerging markets investing far riskier than investing in the US, my ideal comfort zone for wealth compounding. In fact, an asset class whose biggest private equity fund manger (Abraaj Capital) got wiped-out after its philosopher-kings on Mount Olympus commingled investor funds (a crime by any other name stinks just as bad!) is a metaphor for the systemic corruption that pounds most emerging markets I know. This is not a market for widows, orphans and those without the abdominal fortitude to survive 40% draw downs. Merde happens, malheureusement, with distressing rapidity in the emerging markets.