As usual, most of our posts are with a theme on how to profit from them or to stimulate the investment mind. One of Gary Shlling’s ideas from The Age of Deveraging is to short emerging equities. This could be a further catalyst. It’s not easy to short emerging markets and the ETFs that attempt to do it explicitly say they don’t even attempt to correlate for more than a day. That’s discouraging but the ProShares Short MSCI Emerging Markets ETF has returned 28.78% through 2011 third quarter versus -22.46% for its underlying index which isn’t too terrible considering that’s the inverse. The one year EUM return is 14.17% vs -15.89% for same period. Investors looking to hedge or bet that emerging markets have further downside should consider going long EUM.
Europe Bank Woes Felt Around Globe
Companies in Emerging Markets Feel Pinch as Lenders From Euro-Zone Countries Retreat to Shore Up Their Finances
By ALEX FRANGOS in Hong Kong, PATRICK MCGROARTY in Johannesburg and CHARLES ROTH in São Paulo
A pullback in lending by European banks is beginning to be felt by companies in Africa, Australia and Latin America, making borrowing harder and more expensive, and putting pressure on slowing economies.
European banks in recent years dramatically boosted lending to emerging markets and were among the biggest cross-border lenders in these countries. Their retreat has tightened credit in industries—from aircraft to media to mining— squeezing economies already feeling the effects of reduced demand from the developed world for their exports.