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Nicholas Kitonyi
Nicholas Kitonyi
Articles (275)  | Author's Website |

Global Stocks See a Huge Loss of Investor Cash

The slowing global economy is scaring investors as fears of a trade war grow

July 07, 2018

Just when investors were starting to celebrate soaring profits that saw the big funds rake in billions from the global stock market last year, things are starting to take a very different direction. Recent stats are showing that the global economy is decelerating at an alarming rate, while rumors of a coming trade war are causing many investors to quake in their boots.

In fact, even emerging markets that saw promising growth last year are starting to see a significant slump in investment.

Meanwhile, losses of up to $12.4 billion have been reported for global equity funds as well, whose managers are likening the current situation to the horrific losses experienced during the 2008 global economic crisis. From how things are looking, it’s highly likely that the emerging market will remain in bear market status for some time to come, which will lead to a serious loss of value for all the major indexes.

Upon seeing the writing on the wall, most investors are opting out of their mutual and exchange-traded funds to avoid losing out, as most believe that all this talk about global expansion will blow up in everyone’s faces.

Of course, this shocking slump comes right after the iShares MSCI Emerging Markets ETF grew by an all-time high of 18% in just five months. Unfortunately, thanks to a 10.3% loss-and counting- the fund has had to part with a large chunk of its coffers, while the Vanguard FTSE All-World ex-US Index Fund has already lost more than 6% year to date.

Naturally, a lot of the big players in the emerging market have decided to unwind as a result of these developments, while many are choosing to take their funds to the U.S. market instead, which is experiencing relative stability and has given investors inflows of up to $6.3 billion this current year alone. The massive deficit experienced by emerging markets has left a sour taste in the mouths of most investors, so it only makes sense that they’d opt to invest in the much stronger U.S. dollar.

Despite the country being in a bear market along with the rest of the emerging states, China is nevertheless still enjoying massive inflows while maintaining investor confidence. Therefore it is up to investors to decide whether to take advantage of the buying opportunity made possible by the current outflows or to see them as an indication of gloomy times ahead.

According to Erik H. Gordon, while South Africa and Russia seem to be bearing the brunt of the current crisis in the emerging market, the inflows experienced at the beginning of the year are not to be taken lightly. As a result, the weak levels can be leveraged to take advantage of new opportunities that are emerging as a result of the current financial slowdown.

If current trends are anything to go by, then there is a possibility for global equity outflow to reach an all-time high by the end of this year. In addition, Latin America is showing some promising numbers, having reached inflows of up to $30 million despite the losses.

Disclosure: I have no position in securities mentioned in the article.

About the author:

Nicholas Kitonyi
Nicholas is the founder of CAGR Value. He is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on several research sites.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi's Website

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