El-Erian on Emerging Markets

Sheep Get Sheared Repeatedly

Mohamed El-Erian had an interesting take on the state of markets on 10 July. 

One bon mot that caught AA’s eye is the following (italics are AA’s):   

“When liquidity recedes and global risk aversion increases, the underlying differences in the technical robustness of markets come to the fore. This is particularly the case for emerging markets where the base of dedicated (and more stable) investors is small relative to the more flighty dabbling in the asset class.”

AA would argue that this shortcoming in technical is important at all times, particularly in those markets where free float is more theory than reality.