INSUBCONTINENT EXCLUSIVE:
For stocks, it’s 222 days
For foreign-currency bonds, 240 days.
This year’s rout in emerging markets has lasted so long that it’s taken even the most ardent bears
Not one of the seven biggest sell-offs since the financial crisis — including the socalled taper tantrum -- inflicted such pain for so
long on the developing world.
The scope of the slide, as measured in the number of days from peak to trough, is pushing some strategists to
say the slump is more than just a kneejerk reaction to higher US interest rates or the unfolding trade war
It’s become a full-fledged crisis of confidence for investors in developing nations.
While traders typically focus on how much they lose
in terms of percentage change, that yields only a limited perspective on factors driving the markets -- or the potential for recovery
Short, intense sell-offs often lead to short, intense rebounds, lulling investors into a false sense of resilience
That’s what happened repeatedly in 2016 and 2017.
But looking at how long a decline lasts, not just how deep it is, can better expose
Lingering downtrends upend futures and options contracts, forcing traders to take losses
They also lock up investors’ collateral in the form of enhanced margin calls, leaving them little room to make other trading decisions.
A
longer selloff also means the argument for buying the dip — one frequently made by money managers earlier this year — gives way to
cautions over avoiding a falling knife
And that, in turn, can persuade money managers who treat emerging markets as one homogeneous group to sell weak and strong markets in
tandem, no matter their specific fundamentals.
