为什么新兴市场的股票值得买入(2)

So while experts pursuing emerging-markets investment strategies insist they present a buying opportunity, to commonsense civilians and other skeptics, they look and feel like a trap. Who's right?

For the sake of prudence, let's start with the considerable risks. These involve understanding this year's big selloff and acknowledging that by betting on the likes of China, Mexico, and India,

investors are embarking on a potentially lucrative but almost certainly bumpy ride. Two principal factors triggered this year's drop: shock waves from moves by the Federal Reserve Bank that raised interest rates in the U. S.

and the rise in global trade tensions stoked by the Trump administration. Those factors, in turn, triggered a slowdown in emerging-market growth rates. What ensued was fear of a meltdown that could mirror the Asian debt crisis of 1997.

A funding crisis occurs when companies borrow heavily in dollars, and investors lose confidence in the ability of national governments or leading corporations to cover the interest payments.

The lenders then refuse to refinance the debt, leading to a wave of bankruptcies. That's what happened in the late 1990s. "People read these headlines about countries with big currency problems, and given the disaster of 20 years ago, they get really scared," says GMO's John Thorndike.

Investors can be forgiven their concern, considering that funding crises have already hit Argentina and Turkey. The Fed's rate hikes caused the U. S. dollar to spike relative to currencies in the developing world.

Many of those countries have underdeveloped capital markets, so their governments and companies borrow from abroad, frequently in dollars. As the greenback appreciates, they're forced to pay a lot more in Indonesian rupiah or Argentine pesos,

for example, to meet their dollar-denominated interest payments. Central banks then lift their own rates to prevent their currencies from sliding even more, a move that slows their economies,

further curbing the business and tax revenues needed to repay foreign lenders. Since late 2017, Mexico, South Korea, Russia, Indonesia, and Turkey have all raised rates, with Turkey going this year from 8% to 24%.