If you read the financial headlines, there is a battle brewing between the Emerging Markets (EM) and a strengthening US dollar. The standard narrative is that the US Federal Reserve is hiking interest rates and causing the dollar to strengthen. Yield-hungry foreign investors who piled into EM (including Indian) debt and equities are now fleeing. This barrage of selling is causing pressure on EM currencies, which the media is now warning is the beginning of a 1998-style currency crisis.
In my view, the threat of a currency crisis is massively overblown. The reality is that the majority of the currency weakness is centered on the Argentinean Peso and Turkish Lira. The other major EM currencies such as the Indian Rupee have weakened but have certainly not crashed. More importantly, the Asian currency crisis was primarily caused by unsustainable currency pegs. Among the EM countries only Qatar, UAE and Pakistan have official pegs. The remaining 21 EMs have floating currency rates, with the exception of China which has a de-facto peg.
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Acacia Capital was up 12.27% for the second quarter, although it remains in the red for the year because of how difficult the first quarter was. The fund is down 14.25% for the first half of the year. Q2 2020 hedge fund letters, conferences and more Top five holdings Acacia's top five holdings accounted for Read More
Erik Renander, a good friend and Portfolio Manager at Principia Investment Management in the UK, has recently published an article titled The World Boom Ahead. In the article, he provides an alternative narrative to the current negativity surrounding EMs based on four key points. For my subscribers the most relevant point is number three: "India is the next China and is still China." India is now reaching the part of the S-curve where GDP per capita explodes higher driving consumption across numerous sectors. As a US based high net worth investor or family office you should have a dedicated allocation to an India focused fund manager. But don't take my word for it, I highly recommend that you read Erik's article for yourself.
Ashva Capital Management LLC