How to profit from the Emerging Markets rout
How to profit from the Emerging Markets rout. Big current account deficits are about to get bigger as Fed tapering brings a flood of money back to the US. To counter this outflow, Emerging Markets central banks are tightening rates to entice money back. So what's the best strategy to play this scenario? Buy fear. But don't do it in the sharemarket. Currencies and rates have the best exposure to any given individual country's self-help. Equities, on the other hand, reap the downside of tightening - especially when all tighten at once. Furthermore, broad equity valuations are not especially cheap for all the turbulence, when looked at in absol¬ute terms. The MSCI EM index has a price to book value of 1.4-times. Relatively, this is not as dear as the MSCI World index's 2-times - but it is hardly bargain-basement.