Emerging Markets Provide Cheap Income

Emerging markets may be volatile but in the search for diversified income, investors must be prepared to take a bit of capital risk for the reward of dividends

Emma Wall 10 July, 2014 | 12:29PM
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Emerging markets have face several macro-economic challenges this year, making investment in the region hard to predict and even harder to profit from.

The ‘taper tantrum’ in the summer of 2013 saw emerging market indices lose significant value. Following the announcement from Ben Bernanke that the Federal Reserve would be tapering its quantitative easing programme, prospects for the emerging region plummeted. Having been driven upwards by the flow of cheap cash, markets pre-empted the tapering, concluding that without the liquidity afforded by international investment, they would falter.

A year on from Bernanke’s announcement and there are fresh challenges for emerging markets. While only those highly leveraged countries with weak currencies – known as the Fragile Five – were fundamentally damaged by the tapering programme, far more markets face volatility because of political uncertainty.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BlackRock Latin American Ord337.50 GBP-0.15
Jupiter India L Acc142.04 GBP-0.25Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar