How investor insecurity impacts EM performance

Investors are needing continual confirmation of their convictions in order to stay invested, and this is having an impact on emerging market indices, explains Nick Henderson from Skagen Funds.

One aspect of the increasing short-termism in financial markets is that investors often require regular confirmation of their convictions in order to maintain their long-term beliefs. This is evident in emerging markets as, after a difficult 18 months and several false starts, EM equities are seemingly gaining traction versus developed markets. EM returns hit a trough in February, when investor pessimism reached its peak. Since then, emerging indices have outperformed developed market equities by over 5%, and during the second quarter there were inflows of $1bn to emerging market fund...